Interim Results
YouGov PLC
03 April 2006
3 April 2006
YOUGOV PLC
INTERIM RESULTS FOR THE PERIOD ENDED 31 JANUARY 2006
DRIVEN BY
STRONG ORGANIC GROWTH AND NEW INTERNATIONAL OPPORTUNITIES
£'000 Six months ended 31 Six months ended 31 Growth
January 2006 January 2005
Turnover 3,841 1324 190%
Operating profit 1,364 607 124%
Profit before tax 1,448 602 141%
Basic earnings per share 8.0 3.7 116%
Highlights
• Performance ahead of market expectations
• UK business performs strongly - all organic
• Expansion of blue chip client base with new wins in the UK travel and
leisure, media, pharmaceutical, financial and public sectors
• YouGov Middle East performing significantly ahead of initial expectations
- recent new business performance remains strong
• Successful launch of BrandIndex in October 2005
• Continued panel investment and growth
• Momentum continues into the second half - confident of outlook for the
full year
Commenting on the results, Nadhim Zahawi, Joint Chief Executive Officer of
YouGov, said;
'The Group's better than expected performance in the first half confirms the
strength of our business model. The core UK business has delivered good organic
growth and continues to capitalise on the trend toward online research and
polling. The scalability and adaptability of our online research model has also
been demonstrated by the significant contribution from our Middle Eastern
operations and the successful launch of BrandIndex.
'The first half momentum has continued into the second half and the UK and
Middle East businesses are trading well. As a result, the Board is confident of
delivering a significant advance in the Group's financial performance for the
current year compared to last.'
Enquiries:
Nadhim Zahawi, Joint Chief Executive 020 7618 3010
YouGov
Charlie Palmer / Tim Spratt 020 7831 3113
Financial Dynamics
CHAIRMAN'S STATEMENT
For the six months ended 31 January 2006
Introduction
By every measure - turnover, profits, staff numbers - YouGov's growth continued
to accelerate during the six months to 31 January 2006, the period covered by
these interim results. The core UK business has continued to expand and one year
on from the flotation we have delivered two significant developments that
provide us with a solid platform for further growth in the future. We launched
our first syndicated subscription product, BrandIndex; and we have opened and
established active control over our Dubai-based subsidiary, YouGov ME FZ LLC.
As the benefits of online research - speed, accuracy and efficiency - become
increasingly recognised among clients so the opportunities continue to grow.
YouGov's strategy going forward is to grow through a combination of product
development and geographical expansion as well as through selective acquisition.
We have been actively investing in our core asset - our people. Staff numbers
have increased from 20 to a Group headcount of 41. Recruitment has taken place
across all divisions including our sales team, our key accounts and insight
teams and our service delivery and operations.
Financial performance
Turnover has increased by 192% to £3.8 million in the period (£1.3 million in
the six months to 31 January 2005), already exceeding that reported for the full
year to 31 July 2005. Profits before tax rose 141% to £1.4 million and earnings
per share increased from 3.7 pence to 8.0 pence. Cash generated by operations
was £704,000 (£483,000 in the six months to 31 January 2005).
The growth in the business has been driven by two factors: the 47% revenue
growth in the UK compared with the same period last year, and the strong
performance from the Middle Eastern operation. Revenues generated by the Middle
Eastern business total £1.9 million in the period. The growth in the UK
demonstrates our ongoing commitment to the omnibus product and a renewed focus
on our bespoke business. Revenues have also started coming in from our new
subscription based syndicated research product, BrandIndex, which is performing
in line with our expectations.
During the first six months, YouGov has invested in its Middle East operations
and BrandIndex. Despite these factors, margins remain strong, and have been
maintained.
Our Middle East operations commenced in September 2005. In agreement with our
local partners, less capital was required from them than was originally expected
and as such YouGov's share has increased to 78% of the issued ordinary share
capital. Since launch we have successfully tendered for a number of large
contracts with governments, large multinationals and media partners.
On 31 January 2006, YouGov Group's fixed assets totaled £107,000 (£50,000 at 31
January 2005) reflecting our ongoing investment in our infrastructure. Current
assets total £6.8 million (£1.6 million at 31 January 2005), including £4.5
million in cash or on deposit. Current liabilities stood at £1.9 million (£0.7
million at 31 January 2005). Overall net assets stood at £5.0 million (£0.9
million at 31 January 2005).
The Directors are not recommending the payment of a dividend at this point,
which is consistent with statements made at the time of flotation and reflects
the age of the Company and the opportunities available. The board may consider
payment of a dividend at year end.
Operational highlights
YouGov has clearly established its position as a full-service online research
agency with strong client relationships generating a high level of repeat
business.
UK
The strong organic growth in the UK has been driven by a combination of
increasing the amount of research that we provide to our existing clients and
winning new clients. YouGov is now increasingly short listed against
traditional top 10 research agencies for end-client business and is recording a
good new-business success rate.
During the first six months of the year, the Group has strengthened its skill
set and product range through the recruitment of new staff and with the ongoing
development of BrandIndex. Perception of YouGov as a pioneering market
researcher has strengthened considerably, from earlier perceptions of it as
primarily a political pollster.
Key projects completed in the first six months include work on pre-ad testing,
pricing and service comparison, consumer usage and attitudes, concept and
package testing, in-home product usage tests, savings and pensions, consumer
confidence and key business decision-maker research.
New and existing clients for whom some of our key projects were completed are
from the advertising, marketing communications, retail, FMCG and financial
sectors. Other repeat and new project work was completed for media (both print
and broadcast) as well as central and local government clients and
non-governmental organisations.
At the same time an even wider range of YouGov project work is published in the
media reflecting the agency's extending client audience and increasing business
in sectors other than political and opinion polling.
New Product development and international expansion
Consistent with the strategy outlined at the time of the listing in 2005, YouGov
has successfully exploited its online market research expertise to develop new
products and extend its business internationally.
During the period YouGov launched a new research product, BrandIndex. This
provides daily tracking of approximately 1,100 consumer brands in 32 sectors
across seven different measures of brand perception. Sales of BrandIndex
subscriptions are accelerating following the launch period and are now in double
figures. Sales have mainly been to blue-chip clients in a number of sectors.
The data is delivering just the sort of brand specific insights we expected by
measuring public response to observable outside events and showing shifts in
consumer sentiment. We believe that as we gain more historical data, including a
complete yearly cycle, we will be able to forecast change with greater
confidence.
The BrandIndex is also gaining strong exposure and credibility in the media. A
weekly column in the Daily Telegraph business section discusses BrandIndex data,
and there are other regular bulletins in Media Week and other trade press.
Alongside our focus on sales, we plan to increase our efforts to generate
increased and sustained media exposure to demonstrate the strength of the
product. We continue to expect our new product BrandIndex to break even
in its first full year and to be a significant contributor to YouGov profits in
the future.
We have invested in our panel which has expanded from 98,000 active panelists at
31 July 2005 to 145,000 at the end of January 2006. Panel churn remains low and
response rates remain high. We have expanded our panel footprint by venturing
into Canada, in time for the Canadian general election.
Since the period end, YouGov launched a 50:50 joint venture with Execution
Limited (one of Europe's leading full-service agency stockbrokers) on 6 February
2006 called YouGovExecution Limited (YGX). YGX combines Execution Ltd's
financial market understanding with the speed and accuracy of YouGov's online
surveying capabilities to provide financial institutions with a competitive edge
through primary research into consumer and business trends. The initial
investment made is £100,000. We are optimistic about the synergistic
opportunities for the joint venture.
International
These are the first reported results which include our subsidiary YouGov ME FZ
LLC, which conducts market research and polling across the Middle East as well
as providing its media partners with detailed monthly surveys. The new company
is based in Dubai, the commercial hub of the region. However we are already
providing a range of clients across the region with primarily ad-hoc research
solutions. As the results for the six month period to 31 January 2006 confirm,
trading has been very successful with revenues exceeding our initial
expectations.
The success of our Middle Eastern business demonstrates the scalability of
YouGov's core expertise and intellectual property. While the current focus for
the time being is on growing this business we shall continue to look at other
markets.
Market conditions
Demand for online market research continues to grow. Inside Research forecasts
that the European market is now valued at $326million, up from $170million in
2005. It is estimated that at least 60% of this will be generated in the UK
through a combination of single and multi-country research projects.
As the benefits of online research become increasingly recognised among the
clients so the opportunities for YouGov continue to grow. We relish the
challenges of this dynamic environment, and believe we are well-placed to
continue to deliver innovative research tools that meet our clients changing
needs.
Current trading and outlook
The Group has performed strongly during the first six months of the year and
this momentum has continued into the second half. The UK and Middle East
businesses are trading well and while the ad-hoc nature of the Middle Eastern
business makes it difficult to predict revenue and profitability into the next
financial year at this time, the Board is confident of delivering a significant
advance in the Group's financial performance for the current year compared to
last.
CONSOLIDATED SUMMARISED PROFIT AND LOSS
For the ended 31 January 2006
Note 6 months to 6 months 12 months
31/1/06 to 31/1/05 to 31/7/05
£'000 £'000 £'000
Group Turnover 3,841 1,324 2,942
Cost of sales (926) (87) (476)
Gross Profit 2,915 1,237 2,466
Other operating income and charges (1,551) (630) (1,505)
Operating profit 1,364 607 961
Interest receivable 84 11 51
Interest payable - (16) (16)
Profit on ordinary activities before taxation 1,448 602 996
Tax on profit on ordinary activities 2 (183) (188) (305)
Profit on ordinary activities after taxation 1,265 414 691
Minority interests (194) 0 0
Equity dividends 3 - (436) (436)
Profit/(loss) retained and transferred to reserves 1,071 (22) 255
Earnings per share
- basic 4 8.0 3.7 5.8
- diluted 7.6 3.5 5.5
There are no other historical cost, profits or other recognised gains and losses
in the year.
CONSOLIDATED SUMMARISED BALANCE SHEET
At 31 January 2006
31/1/06 31/1/05 31/7/05
£'000 £'000 £'000
Fixed assets 107 50 63
Current assets
Debtors 2,288 716 769
Cash at bank and in hand 4,544 880 3,796
6,832 1,596 4,565
Creditors: amounts falling due within one year (1,885) (735) (870)
Net current assets 4,947 861 3,695
Total assets less current liabilities 5,054 911 3,758
Provisions for liabilities and charges (11) (3) (11)
5,043 908 3,747
Capital and reserves
Called up share capital 134 113 133
Share premium account 2,941 371 2,913
Profit and loss account 1,772 424 701
Total attributable to equity shareholders 4,847 908 3,747
Minority interests 196 - -
Total equity 5,043 908 3,747
CONSOLIDATED SUMMARISED CASH FLOW STATEMENT
For the ended 31 January 2006
Note 6 months to 6 months 12 months
31/1/06 to 31/1/05 to 31/7/05
£'000 £'000 £'000
Net cash inflow from operating activities 5 704 483 1,149
Returns on investments and servicing of finance
Interest received 73 10 51
Interest paid - (16) (16)
Net cash inflow/(outflow) from returns on investments 73 (6) 35
and servicing of finance
Taxation - - (202)
Capital expenditure and financial investment
Purchase of tangible fixed assets (60) (5) (28)
Net cash inflow 717 472 954
Equity dividends paid - (385) (436)
Issue of shares - - 3,038
Cost of issue - - (306)
Exercise of share options 31 - -
Payments to repurchase own share capital - - (167)
Repayment of loans - (264) (264)
Amount introduced by directors - 269 -
Amount withdrawn by directors - (190) -
Net cash inflow/(outflow) from financing 31 (185) 2,301
Increase/(decrease) in cash 748 (98) 2,819
OTHER PRIMARY STATEMENTS
For the ended 31 January 2006
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
6 months to 6 months 12 months
31/1/06 to 31/1/05 to 31/7/05
£'000 £'000 £'000
Profit on ordinary activities after taxation 1,265 414 691
Dividends and other appropriations - (436) (436)
1,265 (22) 255
Net issue of share capital 31 - 2,732
Repurchase of own share capital - - (170)
Net increase/(decrease) in shareholders' funds 1,296 (22) 2,817
Opening shareholders' funds 3,747 930 930
Closing shareholders' funds 5,043 908 3,747
NOTES TO THE INTERIM REPORT
For the ended 31 January 2006
1 BASIS OF PREPARATION
The interim financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost convention.
The interim financial information in this report has been neither audited nor
reviewed by the company's auditors.
The principal accounting policies of the Group are set out in the 31 July 2005
annual report and financial statements. The policies have remained unchanged
from the previous annual report with the exception of the basis of
consolidation.
Basis of consolidation
The consolidated financial statements incorporate the accounts of the Company
and all of its subsidiaries
Minority interests in the net assets of the consolidated subsidiaries are
identified separately from the Group's equity and consist of the amount of those
interests at the date of the original business combination plus their share of
changes in equity since that date.
The period to 31 January 2006 is the first in which the Middle East operation
has been consolidated. The company has a controlling interest in that operation
under the terms of Companies Act legislation and FRS 2.
2 SEGMENTAL REPORTING
The group only undertakes one class of business, that of market research.
The group only supplies two geographical segments that are deemed significant,
the UK and the Middle East.
Turnover by origin and destination are not materially different.
Turnover by origin 6 months 6 months 12 months
to 31/1/06 to 31/1/05 to 31/7/05
£'000 £'000 £'000
UK 1,941 1,324 2,942
Middle East 1,900 - -
Group turnover 3,841 1,324 2,942
Operating profit 6 months to 6 months 12 months
31/1/06 to 31/1/05 to 31/7/05
£'000 £'000 £'000
UK 638 607 961
Middle East 726 - -
Operating Profit 1,364 607 961
3 TAX ON PROFIT/LOSS ON ORDINARY ACTIVITIES
6 months 6 months 12 months
to 31/1/06 to 31/1/05 to 31/7/05
£'000 £'000 £'000
The tax charge represents:
United Kingdom corporation tax at 30% (2005: 30%) 183 188 305
The tax assessed for the period is lower than the standard
rate of corporation tax in the UK 30% (2005: 30%).
The differences are explained as follows:
Profit on ordinary activities before tax 1,448 602 996
Profit on ordinary activities multiplied by standard rate of
corporation tax in the period 434 181 299
Effects of:
Overseas earnings not assessable to UK corporation tax (265) - -
Adjustments to tax charge in respect of prior periods 14 7 6
183 188 305
4 DIVIDENDS
6 months 6 months 12 months
to 31/1/06 to 31/1/05 to 31/7/05
£'000 £'000 £'000
'A' Ordinary Shares of 1p - 200 200
'B' Ordinary Shares of 1p - 92 92
'C' Ordinary Shares of 1p - 95 95
'D' Ordinary Shares of 1p - 49 49
- 436 436
5 EARNINGS PER SHARE
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number of
shares in issue during the year. Shares held in employee share trusts are
treated as cancelled for the purposes of this calculation.
The calculation of diluted earnings per share is based on the basic earnings per
share, adjusted to allow for the issue of shares and the post tax effect of
dividends and/or interest, on the assumed conversion of all dilutive options and
other dilutive potential ordinary shares.
Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below.
Diluted Earnings per share
Profit Earnings Dilutive
attributable to attributable to effect of
shareholders ordinary securities Adjusted
shareholders (Options) earnings
6 months to 31/1/06
Earnings £'000 1,071 1,071 1,071
Weighted average number of
shares 13,346,757 669,267 14,016,024
Per Share amount pence 8.0 7.6
6 months to 31/1/05
Earnings £'000 414 414 414
Weighted average number of
shares 11,338,207 463,344 11,801,551
Per Share amount pence 3.7 3.5
12 months to 31/7/05
Earnings £'000 691 691 691
Weighted average number of
shares 11,998,561 661,578 12,660,139
Per Share amount pence 5.8 5.5
6 NET CASH INFLOW/OUTFLOW FROM OPERATING ACTIVITIES
6 months 6 months 12 months
to 31/1/06 to 31/1/05 to 31/7/05
£'000 £'000 £'000
Operating profit 1,364 607 961
Depreciation 15 8 17
(Increase) in debtors (1,507) (211) (263)
Increase in creditors 832 79 434
704 483 1,149
7 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
6 months 6 months 12 months
to 31/1/06 to 31/1/05 to 31/7/05
£'000 £'000 £'000
Increase in cash in the period 748 (97) 2,819
Change in net funds resulting from cash flows 748 (97) 2,819
Repayment of loans - 264 264
Movement in net debt/funds in the period 748 167 3,083
Net funds at start of the period 3,796 713 713
Net funds at end of the period 4,544 880 3,796
8 PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this interim report does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. The
figures for the year ended 31 July 2005 have been extracted from the statutory
financial statements which have been filed with the Registrar of Companies. The
auditors' report on those financial statements was unqualified and did not
contain a statement under Section 237(2) of the Companies Act 1985.
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