Daily Research News Online no. 9017 - Transition Brings Challenges for Fast-Growing YouGov

Transition Brings Challenges for Fast-Growing YouGov

October 13 2008

YouGov has announced results for the year ended 31 July 2008. Turnover has almost tripled to £40.4m and normalised operating profit rose 55% to £8.7m, although reported profit is down 29% to £4.0m.

The firm's turnover rose 183% from £14.3m in the year ending 31st July 2007, with organic revenue growth of 38% in the UK and Middle Eastern businesses and proforma organic revenue growth of 28% overall in the acquired businesses in the US (89%), Germany (13%) and Scandinavia (44%). The revenue of £20.8m from the newly acquired businesses contributed 145% to the Group's revenue growth. Exceptional costs of £1.2m were recorded due to an abortive JV with Australian firm Photon Group.

Normalised earnings per share rose 30% to 8.3p and the firm reports a strong cash balance of £13.4m at 31 July 2008, more than tripled from £4.1m a year earlier. The Directors are not recommending the payment of a dividend.

The company says its investment in new systems and personnel 'resulted in unexpected extra costs and margin pressure' and says that it has responded by putting new financial controls in place across the Group.

CEO Nadhim Zahawi says the year has been one of significant revenue growth due to both acquisitions and organic strength. 'The acquisitions have added new geographies, extended our client base, introduced new products and grown our panel. We have also invested across the business to strengthen our research teams and develop our infrastructure to provide an enlarged platform for future growth.' He adds: 'We are in a strong financial position and expect to continue to deliver revenue growth while investing prudently to ensure that we generate attractive future returns.'

YouGov says it is benefitting from product rollout in its new territories as its new businesses are integrated; and that its new sector specialist teams in the UK have been 'winning strategic projects from large research buyers including Asda, Unilever and News International'. It has also won a ground breaking agreement with CBS to conduct the first ever online Presidential Election forecasts commissioned by a US TV network, and increased its global panel size from 260,000 in 14 countries to 1,750,000 across 31 countries.

A re-branding exercise is planned for 2009 which the company says 'will bring the new businesses within the global YouGov identity while preserving their individual names within their local markets.'

Of the challenges facing it, the company notes: 'YouGov is at an important stage in its maturity as it transitions to becoming a truly global company... In straightforward trading terms the past year has been very successful but as announced in our August statement, the financial result was affected by an abortive acquisition and inadequate monitoring and management of overall costs across the Group, particularly in the second half of the year. We have faced some difficult challenges and learned important lessons this year as our Group has grown and become more complex and diverse. The Board has taken clear steps to respond to these so as to ensure more robust management and financial controls across the Group.'

UK revenues grew by 52% to £12.6m, and operating profit increased by 11% to £3.9m. In the Middle East, revenues grew 18% to £7.7m and operating profit increased by 6% to £3.8m with strong expansion of panels and of the firm's reach across the region, notably in Saudi Arabia. It also has new international partnerships in Turkey and Greece, with BrandIndex licensee Estima and JV YouGovHellas respectively.

Of the future, YouGov notes: 'Following a year of rapid growth, and against the background of recent macroeconomic developments, we believe it is appropriate to take a conservative approach to this year with the focus on organic growth of the enlarged Group.'

Despite the strong growth, YouGov shares joined many other major stocks on Friday in hitting a recent low point, in YouGov's case just under 45p, compared with 189p earlier this year.

Web site: www.yougov.com .