Preliminary Results

RNS Number : 3517D

YouGov PLC

09 October 2018

 

9 October 2018

YouGov plc

Preliminary Results for the year ended 31 July 2018

Tracking well towards five-year growth plans

Summary of Results
	Year to 31 July 2018 £m	Year to 31 July 2017 £m	% Change
Revenue	116.6	107.0	9%
Adjusted Operating Profit1	19.7	14.5	35%
Adjusted Operating Profit Margin	17%	14%	-
Adjusted Profit before Tax1	23.3	16.4	42%
Adjusted Earnings per Share1	16.6p	10.9p	52%
Dividend per Share	3.0p	2.0p	50%
Statutory Operating Profit	11.8	7.6	56%
Statutory Profit before Tax	11.8	7.9	49%
Statutory Earnings per Share	7.7p	4.4p	75%

Financial Highlights

·     Group revenue increased by 9% to £116.6m (12% on a constant currency basis)

·     Adjusted operating profit up by 35% to £19.7m, adjusted profit before tax up 42% to £23.3m and adjusted earnings per share up by 52% to 16.6p

·     Cash generated from operations (before paying interest and tax) increased by 25% to £23.6m (2017: £19.0m)

·     Strong cash conversion¹ of 119% of adjusted operating profit (2017: 130%)

·     Net cash balance of £30.6m (2017: £23.2m)

·     Recommended dividend increased by 50% to 3.0p per share

Operational Highlights

·     Data Products and Services revenue up by 25% to £59.4m (28% on a constant currency basis); now represents 50% of Group total (2017: 44%)          

o  Data Products revenue increased by 26% (30% at constant currency) to £30.4m

o  Data Services revenue increased by 24% (26% at constant currency) to £29.0m

·     Data Products and Services adjusted operating profit increased by 54%

·     Custom Research revenue down by 3% (static at constant currency) to £58.7m as expected due to strategic focus on higher margin work; resulting in adjusted operating profit of £14.1m, an increase of 59%

·     US remains largest profit generator with adjusted operating profit increasing by 78% to £16.6m

1.          Defined in the explanation of alternative performance measures on page 17.

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

"We have delivered revenue and profit growth significantly ahead of our industry and continue to track to meet the financial objectives set out in our five-year plan. The success of that plan has been grounded in a clear vision as we break new ground in our industry. Increasingly, our clients are demanding the rapid analysis of data in real-time and through targeted investments in technology we have built a data engine which serves the modern marketer. However, as the technology of decision making evolves, so must our products and applications. As we continue to invest in our future we are opening new routes to growth, whether that be through scaling our offering in new markets or launching new applications like YouGov Direct which champions privacy in the GDPR age. Trading in the current financial year has started well, underpinning the Board's confidence in meeting their expectations for the year."

Enquiries:

YouGov plc Stephan Shakespeare / Alex McIntosh	020 7012 6000
FTI Consulting Charles Palmer / Harry Staight	020 3727 1000
Numis Securities Limited (NOMAD and broker) Nick Westlake / Toby Adcock	020 7260 1000

 

Chair's Statement

It has been another year of strong organic growth in revenue well above the average across our industry¹, with an improvement in margins and a resulting increase in profitability.

YouGov has one of the world's top international market research and data analytics networks. We now operate from 35 offices in 22 countries. This enables us to serve clients in more than 50 national markets. We operate a global panel of over 6 million engaged panellists who share their data with us in ways that are fully compliant with data protection and data privacy laws, including the new European Union General Data Protection Regulation ("GDPR") which came into force during in the year bringing with it a higher standard for compliance.

Results and Dividend

Group revenues of £116.6m were 9% up on the previous financial year in reported terms and 12% up in constant currency. Adjusted operating profit² was up by 35% to £19.7m. This reflects improved margins which resulted both from operating efficiencies and a planned change of business mix in line with our strategy to focus on subscription data products.

We ended the financial year in July with a net cash balance of £30.6m. The Board is pleased with operating performance, which is at the top end of the current five-year plan with a year to go, and remains confident of future growth potential. Accordingly, we are pleased to recommend a dividend increase of 50% to 3.0 pence per share payable on 17 December 2018.

Strategy and the Next Five-Year Plan

The YouGov Board adopts a long-term planning process to allow us to address changing market needs and to invest to have the right skills, technology and resources to support our ambitions for the business.

Our first five-year plan, which started on 1 August 2014 and will end on 31 July 2019, gave priority to shifting the balance of the business from one-off custom research to syndicated data products provided on a subscription basis. This required us to move further away from the traditional market research model - a consulting model - to a real-time data analytics model. We believe this syndicated-data subscription approach provides us with a higher quality of earnings and is a better fit for the needs of clients who increasingly demand rapid analysis of real-time data on an international basis.

The Board is currently finalising our second five-year plan, which will run for the period from 1 August 2018 to 31 July 2023. The two plans will overlap for one year to avoid a 'cliff-edge' of incentives and thus avoid short-termist behaviour. We intend to share the details of the new five year plan with the Company's major shareholders, and to seek their feedback on a new long-term incentive plan tied to it, in the spring of 2019.

1.        According to the ESOMAR Global Market Research Report published in September 2018, the global research market grew by 3.3% in 2017 (or by 1.0% after inflationary effects are factored in).

2.        Defined in the explanation of alternative performance measures on page 17.

Board Composition and Governance Framework

The past year has seen changes as we have strengthened our Board.

In December 2017, we appointed two new Executive Directors. Alex McIntosh, previously the Group's Chief Strategy Officer, was promoted to the role of Chief Financial Officer and took over from Alan Newman who retired in December 2017. Sundip Chahal, the Group's Chief Operating Officer since 2014, joined the Board reflecting the increased scope of his role. Doug Rivers, Chief Scientist, stepped down from the Board but continues in his full-time senior executive role with an expanded remit for managing the Group's global technology development teams.

Additionally in December 2017, Andrea Newman joined us as a Non-Executive Director. As the Global Head of Marketing - Wealth and Brand Communications at HSBC Holdings plc she brings great experience and insight into the needs of international marketing clients.

After the start of the new financial year, in September 2018, Ashley Martin joined us as a Non-Executive Director. With effect from 1 November 2018, Ashley will Chair the YouGov Board's Audit & Risk Committee, taking over from Nick Jones who will be remaining on the Committee and continuing in his role as Senior Independent Director.

To support our newly composed Board, during the year we added additional resource to the Corporate Secretariat and reviewed and updated our Board Evaluation and Succession Planning procedures. We have been following the Quoted Companies Alliance Corporate Governance Code since 2014. We were pleased to adopt the revised code during the year (the "QCA Code 2018") and are confident in our application of its ten principles in our governance framework. In line with the revised code, it is intended that from the 2019 AGM onwards all Directors will retire and be subject to re-election by the Shareholders at each AGM.

With six independent Non-Executive Directors of varied professional backgrounds, and three experienced Executive Directors, we feel the YouGov Board exhibits a good balance of skills and knowledge combined with the necessary challenge and external perspective to support the increased scale and ambition of our business.

Roger Parry

Chair

9 October 2018

 

Chief Executive Officer's Review

Strategy Overview

This is the fourth consecutive year in which YouGov has delivered growth significantly above the market both in revenue and profit. Since we launched our first five-year plan in August 2014, we have shifted our focus from a traditional market research model to a real-time data analytics model. As we move towards announcing our next five-year plan, we are confident we have a clearly superior product that is becoming ever more relevant to the market as we continue to scale and innovate.

Marketers are in a constant arms race with each other for greater efficiency in reaching their target groups and greater effectiveness in converting them to buying. The key elements of this arms race are the richness, relevance and accuracy of marketing data, and the tools to activate data. Fall behind in this race and you are taking a big risk as markets often change quickly, decisively, and unexpectedly.

YouGov has continued to build a market leading position in each of these elements. We have the best data and the best tools in the market.

·     The richness of our data - held in the Cube, our unique data library - provides our clients with exceptionally granular insights on their target audiences. The Cube holds more than 200,000 variables of data that are continuously being updated.

·     The relevance of our data - collected from a proprietary panel of over six million engaged members worldwide - means that it can effectively be put to use in live marketing campaigns. The panel provides single-source data collected across multiple devices, media and environments to give the best insights.

·     The accuracy of our data means that it is reliable, even at the most granular level. This can often only be achieved using advanced data analytics such as MRP (Multilevel Regression with Post-stratification), an advanced statistical methodology which YouGov pioneered and demonstrated to great success in the 2017 UK General Election. We are now applying MRP to other kinds of data, giving us a further competitive edge.

In addition to focussing on the quality of our data, we have continued to make targeted investments in research and development to develop innovative tools. For example, Crunch allows users to process large data sets and conduct complex analysis with drag-and-drop ease at browse-able speeds. It is becoming increasingly embedded in the workflows of our leading clients. Another example is Collaborate, our new self-service tool, which allows users to produce survey questionnaires quickly and efficiently and enhances the commissioning of research.

From A/B Testing to Artificial Intelligence, the technology of decision-making is becoming ever more important to marketing professionals. In response to this trend, YouGov is creating data products that are less like conventional market research studies and more like direct data applications - sophisticated tools allowing rich, relevant and accurate data to be usable in real-time.

We are shortly launching YouGov Ratings, 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 has been designed as a showcase for the quality and breadth of our data, to put YouGov at the heart of everyday conversations.

YouGov has increasingly been supporting brands and media agency clients with improved ad targeting. We have done this through a new proposition, YouGov Audience Data, which fuses YouGov Profiles with trusted partners that on-board our data into the digital ecosystem. YouGov is further evolving the model through the development of our new blockchain-based platform, YouGov Direct. A prototype of the YouGov Direct platform will be operational with a test panel and small group of pioneer clients within this calendar year.

To create high-quality, in-depth, connected data - especially since the introduction of the GDPR - one needs panellists who are highly engaged and have granted (and frequently updated) permissions for the use of their personal data by third parties. In response to this, YouGov is innovating with blockchain technology to deliver a way to permit and verify the data exchange between our panellists and advertisers. Through the design of a platform intended to make data users (companies) accountable to individual data suppliers (panellists), we are creating new opportunities for research, activation and direct marketing.

In addition to these innovations, we have continued to focus on improving the connectedness and interoperability of our products and services aligning them in a single connected system to support all stages of the marketing workflow. As our system develops, so does the opportunity within our markets. We envisage further growth opportunities for YouGov as we begin to play an upstream role in the marketing ecosystem, details of which will be provided when we announce our new five-year strategic plan in Spring 2019.

Operational Review

Throughout the year we have continued to focus on scaling the business. This has included investing in our technology infrastructure (which includes Cube, Crunch and Collaborate), growing our operations capabilities and expanding into new geographic territories.

During the year we have established a new shared services centre in India to complement the existing service centre in Romania and provide 24/7 data processing and analytics coverage. We have also added a commercial arm to this operation, to allow us to offer our data products to the Indian market.

We have established new organic operations in Italy and Spain, initially focussed on selling our flagship products BrandIndex and Omnibus, with Profiles shortly to be made available.

We have also completed two small acquisitions during the year. We acquired a bolt-on acquisition to our existing operation in Australia (Galaxy DP Pty Ltd) where we saw an opportunity to accelerate our growth in that market. We acquired a sports research agency (SMG Insight Limited) where we saw an opportunity to extend our syndicated data products for the sports sector. Post period-end, we have also completed the acquisition of an audience conversation platform (InConversation Media Ltd), where we saw an opportunity to acquire technology for engaging with hard-to-reach audiences.

 

Divisional Review

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

Data Products

Our Data Products division consists of Profiles, YouGov's audience segmentation and targeting tool, and BrandIndex, YouGov's flagship daily brand tracking service. Increasingly, these complimentary products are positioned as a single capability, communicated as 'Plan & Track' to our prospects and clients. During the year, 25% of new Data Products sales globally constituted Plan & Track sales, demonstrating that the strategy is quickly gaining traction in the marketplace.

The Plan & Track solution is instrumental in establishing transparency and a common version of the truth among the key players in the advertising and marketing ecosystem. Advertisers need to find the most attractive avenues through which to grow their brands. Media owners need to demonstrate the desirability and the efficacy of their platforms to brands and their agencies. Agencies are under increasing pressure to justify strategic and tactical investment decisions on behalf of their brand clients. YouGov's Plan & Track solution addresses all of these needs.

The full Plan & Track solution is now available in 13 markets with France, Australia, Hong Kong, Singapore and Thailand launched during the year. With the support of a global media agency as a charter subscriber, we have begun Profiles development in a further eight countries. India, Taiwan, Vietnam and the Philippines will launch by the end of calendar year 2018, along with Italy and Spain, giving us a presence in Europe's 'Big 5' economies, as well as Norway and Finland to complete the Nordic footprint. BrandIndex alone is available in 37 markets, including all 21 current and planned Plan & Track markets, as well as Canada, Mexico, Brazil, Ireland, the Netherlands, Egypt, Saudi Arabia, the United Arab Emirates, Russia, Japan and South Korea.

YouGov also offers our Data products subscribers with additional 'beyond-the-login' capabilities, under the banner of YouGov Data Applications. These capabilities include:

·     With YouGov Dynamic Segmentation, clients are able to run their consumer segmentation against the YouGov panel and then bring the segments into the Plan & Track product, gaining a better understanding of those segments via the thousands of variables in the Cube.

·     With YouGov Audience Data, clients identify and reach target audiences. Seed audiences are created in Profiles and then scaled using look-alike methodology to enable programmatic advertising buys through industry Data Management Platforms (DMPs) and Data Houses.

·     With YouGov Digital Tracking, clients can conduct analyses to validate that a marketing campaign has reached the correct target audience. Clients can identify and create an audience consisting of consumers who have consumed the relevant media during a particular campaign, then monitor brand KPIs such as brand awareness, advertising awareness and purchase consideration among that exposed audience - and compare that to the general population.

These capabilities provide even more value for our subscriber-base, and are helping to increase subscriber renewal rates and drive additional revenue.

New Plan & Track client wins in the year included BBDO, ING, McDonalds, Santander Consumer Bank and Uber.

Data Services

YouGov Omnibus, our popular and fast-turnaround data service, comprises the majority of Data Services revenue. The balance comes from our related Field & Tab service for targeting pre-specified samples of respondents, and from the provision of Sample-Only services in the Nordic and Middle East regions.

Our technology investments in the period have included developments which are enhancing the commissioning and delivery of Omnibus surveys. In most geographies, results are now being delivered to clients through Crunch, our data analytics and visualisation tool. Our new self-service survey design tool, Collaborate, automates the way that clients submit and approve Omnibus and Custom Research survey questions. The Collaborate tool makes the turnaround from the client's initial question generation to YouGov's survey results delivery even faster and smoother for both clients and staff. Collaborate is currently available in the US and Germany, with roll-out to the UK, Spain and Italy planned for this year.

Increasing numbers of clients are taking advantage of our Re-Contact service through which Data Products subscribers can undertake fast-turnaround Omnibus surveys to obtain additional data tailored to their needs from segments of the panel with specific profile characteristics.

New Omnibus client wins in the year included DeBeers, eBay, Hiscox, WE Communications and Vodafone.

Custom Research

YouGov's Custom Research business conducts a wide range of quantitative and qualitative research, tailored to meet clients' specific requirements. The scope, scale and complexity of projects varies significantly and ranges from one-off surveys, through to large-scale national and multinational tracking studies often contracted on an annual basis and often requiring advanced analytics.

We have a number of in-house assets - including the Cube, Crunch, Collaborate and MRP methodology - which are a facilitator and differentiator for our Custom Research business. The YouGov model allows us to minimise the proactive data collection required for each new custom project while at the same time deliver our clients with more connected and tailored data than ever before.

Recurring, single or multi-country custom tracking studies whose data is delivered through Crunch, are a form of custom research that is particularly profitable for YouGov. We have made good progress against our strategy to focus less on one-off projects and more on tracking studies, to improve the profitability of this division. In the year this included exiting parts of the Germany and Middle East businesses with low margins.

New Custom Research client wins in the year included Ikea, Piper-Heidsieck, Pyrex, Revlon and 23andMe.

 

Current trading and outlook

The current year has started well and our order book of multi-year subscription contracts across future years is strong, both of which gives us confidence in our prospects for the year ahead and over the medium term. We continue to see opportunities for growing our suite of data products and services and expanding our geographic footprint.

Our focus for the coming year includes investing in our technology infrastructure to support this growth, expanding into new geographic markets, and increasing our data products subscription client-base to further strengthen the quality of our revenues.

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 US weighting) positions our business well to cope with, or even gain from, potential volatility.

In recent years, we have been focused on implementing the ambitious strategy the Board laid out in our first five-year plan announced in August 2014. As a result we have delivered consistent recurring revenue and profit growth. In the coming months, the Board will be developing our next five-year plan, one which we will be designed to ensure YouGov's position as significant a global player in the field of research data and analytics - and we look forward to sharing the details of that plan with shareholders in the spring of 2019.

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

Stephan Shakespeare

Chief Executive Officer

9 October 2018

 

Chief Financial Officer's Review

The 12 months to 31 July 2018 results demonstrate continued progress on the strategic aims of concentrating on higher margin and scalable sales. Total Group Revenue for the period was £116.6m compared to £107.0m in the previous 12 month period. Revenue growth was 9% on a reported basis (12% on constant currency basis). Acquisitions in the period contributed 2% to the overall growth rate.

The focus on restructuring lower margin generating business units coupled with the continued growth in our high margin product sales resulted in an increase in gross margins from 80% in 2017 to 82% in 2018. Adjusted operating margins increased from 14% to 17%.

Group operating costs (excluding amortisation of intangibles and exceptional items) of £75.4m (2017: £71.2m) increased by 6% in reported terms, and 8% in constant currency terms. The average number of staff (full-time equivalents) employed during the year increased by 37 to 816. Average revenue per head increased to £143,000 from £137,000 and staff costs, net of costs capitalised, as a percentage of revenue decreased by 1% point to 49%.

Group Adjusted Operating Profit (before amortisation and separately reported items) increased to £19.7m (35% growth in the period) with strong continued growth in Data Products, coupled with margin improvement in the Custom business. The statutory operating profit (which is after charging amortisation of £7.0m and other separately reported items of £0.9m) increased to £11.8m (2017: £7.6m).

Amortisation charges for intangible assets in the period totalled £7.0m (2017: £6.5m) of which £0.7m (2017: £1.0m) related to assets acquired through business combinations, £2.8m (2017: £2.8m) to separately acquired assets and £3.5m (2017: £2.7m) to internally generated assets. The Group recognised net finance expense of £0.1m during the period (2017: income of £0.3m).

Central costs increased by 98% in the year. This was primarily due to an increase in the Long Term Incentive Plan (LTIP) charge of £1.8m reflecting the increased likelihood that the 'LTIP 2014' plan will pay out in full in November 2019; and a reallocation of £2.5m of costs from Custom Research to Central Costs to reflect that these costs related to wider innovation initiatives.   

Adjusted profit before tax¹ of £23.3m was an increase of £6.9m (42%) on the comparable result of £16.4m for the 12 months to 31 July 2017. The adjusted tax rate decreased from 30% to 25% mainly as a result of a reduction in US tax rates. The adjusted tax rate is higher than the standard rate of corporation tax in the UK as a result of profits arising in countries with a higher tax rate, notably the US. Adjusted earnings per share¹ rose by 52% to 16.6p, compared to 10.9p in the twelve months to 31 July 2017. A statutory profit before tax of £11.8m was reported after charging separately reported items, amortisation and share based payment costs of £11.5m (2017: £8.5m).

In December 2017, the Group acquired Galaxy DP Pty Ltd ("Galaxy"), an Australian-based opinion polling company. The terms of the transaction included an upfront payment of AUS$1.25m with an earn-out based on future performance over the following two years. In May 2018, a second acquisition was completed for the remaining 80% of the issued share capital of SMG Insight Limited ("SMG"), a sports focused research agency. The transaction was structured with a payment of £1.0m at completion and an earn-out based on performance over a three year period.  

1.          Defined in the explanation of alternative performance measures on page 17.

Investment in technology and panel recruitment for the period amounted to £4.4m and £2.8m respectively. In the period we increased the global panel from 5.6m to 6.6m with new panels established in Italy, Spain, Mexico and Taiwan. Our technology investments continue in websites and mobile applications, survey systems, and our data analytics tool, Crunch. £1.0m (2017: £0.8m) was spent on the purchase of property, plant and equipment, resulting in a total investment in fixed assets of £8.2m (2017: £7.8m). Other cash outflows included taxation payments of £5.5m (2017: £2.5m) and the annual dividend payment of £2.1m (2017: £1.5m) in December 2017.

There was a net cash inflow of £7.2m in the period, compared to £7.5m in the twelve months to 31 July 2017. This was increased by a £0.2m gain in the value of non-Sterling cash balances due to foreign exchange movements so that net cash balances of £30.6m were £7.4m higher than at 31 July 2017 and £9.3m higher than the balances of £21.3m as at 31 January 2018.

The Group's results were affected by the net appreciation of GBP as its average exchange rate was 6% higher against the USD and 3% lower against the Euro in the period compared to the 12 months to 31 July 2017. The net impact of foreign exchange on the Group's adjusted operating profit was a decrease of £0.8m compared to calculation in constant currency terms. The underlying increase in adjusted operating profit, compared to the 12 months ended 31 July 2017, was 41%. 

Performance by Product and Service

Data Products

Revenue from Data Products increased by 26% (30% in constant currency terms) in the period. The adjusted operating profit from Data Products increased by 66% to £11.7m and the operating margin increased by 9% points to 38%. The improving margin partly reflects the growing contribution from Profiles as well as a reduction in the use of third party data collection.

Our flagship product, BrandIndex, grew revenue by 19% (23% in constant currency terms) to £23.5m (2017: £19.8m). BrandIndex accounts for 20% of total Group revenue in the period and increased its subscriber numbers to 37 markets across the world. Profiles made good progress, with sales in this period together with the subscription growth achieved last year led to global revenue increasing by 81% (87% constant currency) to £6.6m.

Geographically, the US remains the largest Data Products market and grew by 17% in GBP terms, (23% in local currency). In the UK, revenue grew by 29%, a faster rate than the previous year, due to faster new business sales in the second half of the previous financial year. There was also strong revenue growth in other markets including 25% in Germany (28% in local currency) and 13% in the Nordics (10% in local currency). The newer markets of France and Asia Pacific each grew their revenue in reported terms by over 50%.

Increasingly BrandIndex and Profiles are sold as a combined proposition as "Plan and Track". BrandIndex is now available in 37 markets and Profiles is available in 19 markets. Going forward, we will report on the combined Plan & Track performance rather than YouGov BrandIndex and YouGov Profiles separately.

In December 2017 the YouGov Reports product was discontinued resulting in a restructuring charge of £0.2m. Revenues in the year up to the date of closure were £25,000.

Data Services

Revenue from Data Services, 94% of which is Omnibus, our online fast turnaround service increased by 24% (26% in constant currency terms) to £29.0m, mainly due to strong growth in international markets. This growth contributed to an increase of 40% in the Data Services operating profit to £8.0m and the operating margin rose from 24% to 28% reflecting investment in the newer markets, notably Asia Pacific delivering growth.

This included a 46% increase in reported revenue in USA (53% growth in local currency), and a 59% increase in Asia Pacific (63% in local currency). France and Middle East also grew strongly, by 19% (16% local currency) and 21% (27% local currency) respectively. In the UK, where YouGov Omnibus is the market leader, revenue grew by 12%.

Custom Research

Performance in the period was impacted by the reduction of low profit or loss making activities in Germany and the Middle East in the latter half of last financial year. In the second half of the year, further headcount reductions to the Custom Research division in Germany, Nordics and Middle East resulted in a separately reported charge of £0.7m. Reflecting the reduction of activities in some areas, revenue for the period declined by 3% in reported terms to £58.7m.

However, continued focus on a Custom Research offering which utilises our proprietary panel, survey system and Cube data has resulted in a significant increase in profitability in this division. The adjusted operating profit increased by 59% to £14.1m and the operating margin improved by 9% points to 24%. This was also due to operating costs reducing by 18% mainly as a result of the restructuring of underperforming areas.  

The continued rationalisation of Custom Research led to mixed performances across the geographies. In the UK, where our core panel-based model is most established, revenue grew by 5% (benefitting from several large tracker contracts) although the operating margin decreased from 33% to 31%, due to an increase in operating costs.

In the US revenue grew by 23%, with growth coming both from new business and our existing client portfolio. Operating margin grew to 28% from 16% as a result of continued operational efficiency gains.

Middle East and Germany revenue fell by 32% and 37% in local currency terms due to restructuring of operations. Reported revenue also decreased by 15% in the Nordics in local currency terms.

Revenue		Year to 31 July 2018 £m		Year to 31 July 2017 £m		% Change		% Change at Constant Currency
Data Products		30.4		24.1		26%		30%
Data Services		29.0		23.3		24%		26%
Total Data Products & Services		59.4		47.4		25%		28%
Custom Research		58.7		60.2		(3%)		0%
Intra-group Revenues		(1.5)		(0.6)		-		-
Group		116.6		107.0		9%		12%
Adjusted Operating Profit	Year to 31 July 2018 £m	Year to 31 July 2017 £m		% Change		Operating Margin %
						2018		2017
Data Products	11.7	7.0		66%		38%		29%
Data Services	8.0	5.7		40%		28%		24%
Total Data Products & Services	19.7	12.7		54%		33%		27%
Custom Research	14.1	8.9		59%		24%		15%
Support Costs	(14.1)	(7.1)		(98%)		-		-
Group	19.7	14.5		35%		17%		14%

Performance by Geography

Restructuring costs of £1.4m in the period were the result of further restructuring undertaken in the UK, Middle East and Germany to align activities with the Group's strategic objectives. Revenue in the Middle East declined by 26% due to the closure of non-online research activities. The UK and Germany achieved revenue growth of 15% and 18% whilst stopping low margin revenue of £0.7m and £1.9m respectively. 

Our geographic expansion continued with new offices in Spain, Italy and India bringing the total number of countries the Group operates in to 22. All geographies other than Mainland Europe generated increased adjusted operating profits in the period with the US and UK continuing to be significant contributors with growth rates of 78% and 40% respectively. We are pleased to see the investment in Asia Pacific generating profits in the period whilst we continue investing in research capability in more countries in the region.

Revenue	Year to 31 July 2018 £m	Year to 31 July 2017 £m	Revenue Growth %	Revenue Growth at Constant Currency %
UK	31.3	27.1	15%	15%
USA	48.2	40.7	18%	24%
Mainland Europe	21.6	21.2	2%	2%
Middle East	12.1	16.3	(26%)	(22%)
Asia Pacific	8.7	5.5	59%	62%
Intra-group Revenues	(5.3)	(3.8)	-	-
Group	116.6	107.0	9%	12%

Adjusted Operating Profit	Year to 31 July 2018 £m	Year to 31 July 2017 £m	Operating Profit Growth %	Operating Margin %
				2018	2017
UK	12.0	8.6	40%	38%	31%
USA	16.6	9.3	78%	34%	23%
Mainland Europe	2.3	2.3	(2%)	11%	10%
Middle East	3.6	2.4	45%	29%	15%
Asia Pacific	0.8	(0.9)	-	10%	(16%)
Corporate/Unallocated	(15.6)	(7.2)	117%	-	-
Group	19.7	14.5	35%	17%	14%

Panel Development by Geography (Centre all)

We continue to expand the reach of our global panel, with recruitment launched in Italy, Spain, Mexico and Taiwan during the year. This, along with growth to support increased demand in existing markets, not least the UK, USA and Germany, led to a total increase of 17% in the size of the panel in the period. As at 31 July 2018, the Group's online panel comprised a total of 6.6 million panellists. The below table shows the breakdown by region.

Region	Panel Size at 31 July 2018	Panel Size at 31 July 2017
UK	1,355,800	1,182,100
USA & Mexico	2,415,000	2,152,400
Mainland Europe	952,000	770,100
Middle East	934,700	858,400
Asia Pacific	946,200	673,700
Total	6,603,700	5,636,700

Group Financial Performance

Amortisation of Intangible Assets

In the 12 months to 31 July 2018 amortisation charges for intangible assets of £7.0m were £0.5m higher than the previous year. Amortisation of the consumer panel increased by £0.4m to £2.6m reflecting the additional investment made to grow the panel in the past three years. Amortisation of software increased by £0.5m to £4.0m, £3.5m (2017: £2.7m) of the total charge related to assets created through the Group's own internal development activities, £0.3m (2017: £0.6m) related to separately acquired assets and £0.2m (2017: £0.2m) to was for amortisation on assets acquired through business combinations.

Other Separately Reported Items

Discontinued activities in the UK, Mainland Europe and Middle East and the establishment of centralised support functions resulted in restructuring costs of £1.4m in the year to 31 July 2018 (£2017: £0.6m). In addition, costs of £1.1m were incurred in relation to the acquisitions of Galaxy and SMG during the year, including £0.8m of acquisition consideration treated as employment costs, as well as £0.1m in respect of acquisitions completed after the year-end.  These costs were partly offset by a £1.7m fair value gain on the 20% shareholding in SMG held prior to the acquisition of the remaining 80%.

 

Analysis of Operating Profit and Earnings per Share

	31 July	31 July
	2018	2017
	£'000	£'000
Operating profit	11,758	7,557
Amortisation of intangibles	7,024	6,483
Other separately reported items	892	488
Adjusted operating profit 1	19,674	14,528
Share-based payments	3,571	1,488
Imputed interest	75	20
Net finance (expense)/income	(52)	254
Share of post-tax profit in associates	66	103
Adjusted profit before tax 1	23,334	16,393
Adjusted taxation1,	(5,786)	(4,912)
Adjusted profit after tax 1	17,548	11,481
Adjusted earnings per share (pence) 1	16.6	10.9

1.        Defined in the explanation of alternative performance measures on page 17.

Cash Flow

The Group generated £23.6m (2017: £18.9m) in cash from operations (before paying interest and tax) including a £0.6m (2017: £2.3m) net working capital inflow; as a result the cash conversion rate (percentage of adjusted operating profit converted to cash) reduced from 130% to 119% of adjusted operating profit.

Capital Expenditure

Expenditure on investing activities increased to £8.8m (2017: £7.7m) including £8.2m (2016: £7.8m) on capital expenditure as detailed below and £0.7m in consideration, net of cash acquired, for the acquisitions of Galaxy and SMG.

	31 July	31 July
	2018	2017
	£'000	£'000
Internally generated software	3,928	3,385
Panel recruitment	2,834	3,471
Other intangible assets	455	112
Total expenditure on intangible assets	7,217	6,968
Purchase of property, plant and equipment	969	843
Total capital expenditure	8,186	7,811

Net expenditure on financing activities increased by £0.8m to £2.1m, including the dividend payment of £2.1m (2017: £1.5m).

Net cash balances at the year-end increased by £7.4m to £30.6m. Net cash inflow in the year was £7.2m (2017: £7.5m) and currency fluctuations in the year resulted in an exchange gain of £0.2m (2017: £0.2m).

Currency

The Group operates across multiple currencies, primarily USD$ and Euros. The appreciation in the US$/GBP£ rate resulted in approximately 5% lower reported revenue growth in the US, Middle East and Asia. Group operating expenses were 2% lower than if calculated in constant currency.

Taxation

The blended tax rate payable by the Group decreased from 30% to 25% in the period due a decrease in corporation taxes in the US. The tax charge for the year was £3.6m on a statutory basis (£3.3m in 2017).  On an adjusted basis the tax charge for the year was £5.8m (2017: £4.9m) which is a tax rate of 25% on the adjusted profit before tax.

Balance Sheet

As at 31 July 2018, total shareholder's funds and net assets increased from £80.5m to £92.1m. Net current assets increased from £20.7m to £25.3m. Current assets increased by £11.8m to £66.7m with debtor days decreasing from 58 to 56. Current liabilities increased by £7.2m to £41.4m with creditor days decreasing to 21 days from 24 days at 31 July 2017. The focus on increasing revenues from subscriptions has resulted in an increase of £1.8m of deferred revenue which is included in Current liabilities. Non-current liabilities increased by £6.3m to £11.2m partly due to £5.1m of contingent consideration payable in respect of the acquisitions in the year.

Proposed Dividend

The Board is recommending the payment of a final dividend of 3.0 pence per share for the year ended 31 July 2018. If shareholders approve this dividend at the AGM (scheduled for Wednesday 12 December 2018), it will be paid on Monday 17 December 2018 to all shareholders who were on the Register of Members at close of business on Friday 7 December 2018.

Alex McIntosh

Chief Financial Officer

9 October 2018

 

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 amortisation of intangible assets charged to operating expenses and separately reported items
Adjusted operating profit margin	Adjusted operating profit expressed as a percentage of revenue
Adjusted profit before tax	Profit before tax before amortisation of intangible assets charged to operating profit, share based payment charges, imputed interest and separately reported items.
Adjusted taxation	Taxation due on the adjusted profit before tax, thus excluding the tax effect of amortisation and exceptional items	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 operating profit	Indicates the extent to which the business generates cash from adjusted operating profits

 

Publication of Non-Statutory Accounts

The financial information relating to the year ended 31 July 2018 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.

 

	Note	2018 £'000	2017 £'000
Revenue	1	116,559	107,048
Cost of sales		(21,495)	(21,339)
Gross profit		95,064	85,709
Operating expenses		(83,306)	(78,152)
Operating profit	1	11,758	7,557
Amortisation of intangibles		7,024	6,483
Other separately reported items	2	892	488
Adjusted operating profit	1	19,674	14,528
Finance income		151	480
Finance costs		(202)	(226)
Share of post-tax profit/(loss) of associates		66	103
Profit before taxation	1	11,773	7,914
Taxation	3	(3,615)	(3,273)
Profit after taxation	1	8,158	4,641
Attributable to:
- Owners of the parent		8,158	4,671
- Non-controlling interests		-	(30)
		8,158	4,641
Earnings per share
Basic earnings per share attributable to owners of the parent	5	7.7p	4.4p
Diluted earnings per share attributable to owners of the parent	5	7.3p	4.2p

All operations are continuing.

	2018 £'000	2017 £'000
Profit for the year	8,158	4,641
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Currency translation differences	142	1,159
Other comprehensive income for the year	142	1,159
Total comprehensive income for the year	8,300	5,800
Attributable to:
- Owners of the parent	8,300	5,830
- Non-controlling interests	-	(30)
Total comprehensive income for the year	8,300	5,800

Items in the statement above are disclosed net of tax.

Assets (Centre all)	Note	2018 £'000	2017 £'000
Non-current assets
Goodwill	6	52,060	43,746
Other intangible assets	7	13,297	11,214
Property, plant and equipment	8	3,037	3,278
Investments in associates		191	345
Deferred tax assets		9,434	6,054
Total non-current assets		78,019	64,637
Current assets
Trade and other receivables	9	34,672	30,699
Current tax assets		1,442	738
Cash and cash equivalents (excluding bank overdrafts)		30,621	23,481
Total current assets		66,735	54,918
Total assets		144,754	119,555
Liabilities
Current liabilities
Trade and other payables	10	34,998	29,389
Borrowings		-	262
Current tax liabilities		1,247	777
Contingent consideration		1,409	-
Provisions		3,791	3,749
Total current liabilities		41,445	34,177
Net current assets		25,290	20,741
Non-current liabilities
Contingent consideration		5,110	-
Provisions		4,000	3,222
Deferred tax liabilities		2,128	1,683
Total non-current liabilities		11,238	4,905
Total liabilities		52,683	39,082
Net assets		92,071	80,473
Equity
Issued share capital		211	211
Share premium		31,300	31,261
Merger reserve		9,239	9,239
Foreign exchange reserve		15,031	14,889
Retained earnings		36,290	24,873
Total equity attributable to owners of the parent		92,071	80,473
Total equity		92,071	80,473

		Attributable to equity holders of the Company
	Note	Issued share capital £'000	Share premium £'000	Merger reserve  £'000	Foreign exchange reserve £'000	Retained earnings £'000	Equity attributable to owners of the parent £'000	Non-controlling interests in equity £'000	Total  equity £'000
Balance at 1 August 2016		209	31,086	9,239	13,730	19,795	74,059	30		74,089
Exchange differences on translation		-	-	-	1,159	-	1,159	-		1,159
Net gain recognised directly in equity		-	-	-	1,159	-	1,159	-		1,159
Profit/(Loss) for the year	1	-	-	-	-	4,671	4,671	(30)		4,641
Total comprehensive income/(expense) for the year		-	-	-	1,159	4,671	5,830	(30)		5,800
Issue of shares		2	175	-	-	(2)	175	-		175
Dividends paid	4	-	-	-	-	(1,470)	(1,470)	-		(1,470)
Share-based payments		-	-	-	-	1,488	1,488	-		1,488
Tax in relation to share-based payments		-	-	-	-	391	391	-		391
Total transactions with owners recognised directly in equity		2	175	-	-	407	584	-		584
Balance at 31 July 2017		211	31,261	9,239	14,889	24,873	80,473	-		80,473
Exchange differences on translation		-	-	-	142	-	142	-		142
Net gain recognised directly in equity		-	-	-	142	-	142	-		142
Profit for the year	1	-	-	-	-	8,158	8,158	-		8,158
Total comprehensive incomefor the year		-	-	-	142	8,158	8,300	-		8,300
Issue of shares		-	39	-	-	-	39	-		39
Dividends paid	4	-	-	-	-	(2,106)	(2,106)	-		(2,106)
Share-based payments		-	-	-	-	3,571	3,571	-		3,571
Tax in relation to share-based payments		-	-	-	-	1,794	1,794	-		1,794
Total transactions with owners recognised directly in equity		-	39	-	-	3,259	3,298	-		3,298
Balance at 31 July 2018		211	31,300	9,239	15,031	36,290	92,071	-		92,071

 

	Note	2018 £'000	2017 £'000
Cash flows from operating activities
Profit before taxation		11,773	7,914
Adjustments for:
Finance income		(151)	(480)
Finance costs		202	226
Share of post-tax profit of associates		(66)	(103)
Amortisation of intangibles		7,026	6,508
Depreciation		1,231	1,174
Loss on disposal of property, plant and equipment and other intangible assets		7	7
Profit on the disposal of subsidiary undertakings		-	(94)
Share-based payments		3,571	1,488
Other non-cash items *		(566)	-
Increase in trade and other receivables		(2,278)	(1,531)
Increase in trade and other payables		2,097	2,779
Increase in provisions		771	1,026
Cash generated from operations		23,617	18,914
Interest paid		(6)	(2)
Income taxes paid		(5,501)	(2,487)
Net cash generated from operating activities		18,110	16,425
Cash flow from investing activities
Acquisition of subsidiaries (net of cash acquired)		(695)	-
Settlement of deferred consideration		(190)	-
Proceeds from the sale of subsidiary undertakings (net of cash disposed of)		-	150
Purchase of property, plant and equipment	8	(969)	(843)
Purchase of intangible assets		(7,217)	(6,968)
Proceeds from sale of plant, property and equipment		5	-
Dividends received from associates		220	-
Interest received		28	8
Net cash used in investing activities		(8,818)	(7,653)
Cash flows from financing activities
Proceeds from the issue of share capital		39	175
Dividends paid to Shareholders	4	(2,106)	(1,470)
Net cash used in financing activities		(2,067)	(1,295)
Net increase in cash and cash equivalents		7,225	7,477
Cash and cash equivalents at beginning of year		23,219	15,553
Exchange gain on cash and cash equivalents		177	189
Cash and cash equivalents at end of year		30,621	23,219

* Includes (£1,682,000) in respect of the fair value gain on the acquisition of SMG Insight Limited which is offset by £785,000 of contingent consideration in respect of the Galaxy DP Pty Ltd acquisition treated as staff costs.

Nature of operations                                                                                          

YouGov plc and subsidiaries' ("the Group") principal activity is the provision of market research.

YouGov plc is the Group's ultimate parent company. It is incorporated and domiciled in Great Britain. The address of YouGov plc's registered office is 50 Featherstone Street, London EC1Y 8RT United Kingdom. YouGov plc's shares are listed on the Alternative Investment Market of the London Stock Exchange.

YouGov plc's annual consolidated financial statements are presented in UK Sterling, which is also the functional currency of the parent company.

Basis of preparation

The following financial information does not amount to full financial statements within the meaning of Section 434 of Companies Act 2006. The financial information has been extracted from the Group's Annual Report and Financial Statements for the year ended 31 July 2018 on which an unqualified report has been made by the Company's auditors.

The consolidated financial statements of YouGov plc are have been prepared under the historical cost convention modified for fair values under International Financial Reporting Standards as adopted by the European Union (IFRS). These consolidated financial statements have been prepared in accordance with IFRS, IFRS Interpretations Committee (IFRS IC) and the Companies Act 2006 applicable to companies reporting under IFRS.

Financial statements for the year ended 31 July 2017 have been delivered to the Registrar of Companies; the report of the auditors on those accounts was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The 2018 statutory accounts will be delivered in due course.

Copies of the Annual Report and Financial Statements will be posted to shareholders shortly and will be available from the Company's registered office at 50 Featherstone Street, London, EC1Y 8RT.

 

1 Segmental analysis

The Board of Directors (which is the "chief operating decision-maker") primarily reviews information based on product lines: Custom Research, Data Products and Data Services; with supplemental geographical information.

2018	Custom Research £'000	Data Products £'000	Data Services £'000	Eliminations & Unallocated Costs £'000	Group £'000
Revenue	58,657	30,445	28,956	(1,499)	116,559
Cost of sales	(14,205)	(3,700)	(5,089)	1,499	(21,495)
Gross profit	44,452	26,745	23,867	-	95,064
Operating expenses	(30,331)	(15,086)	(15,865)	(14,108)	(75,390)
Adjusted operating profit	14,121	11,659	8,002	(14,108)	19,674
Amortisation of intangible assets					(7,024)
Other separately reported items					(892)
Operating profit					11,758
Finance income					151
Finance costs					(202)
Share of post-tax loss in joint ventures and associates					66
Profit before taxation					11,773
Taxation					(3,615)
Profit after taxation					8,158
Other segment information
Depreciation	596	214	192	229	1,231

2017
Revenue	60,220	24,070	23,296	(538)	107,048
Cost of sales	(14,389)	(3,284)	(4,204)	538	(21,339)
Gross profit	45,831	20,786	19,092	-	85,709
Operating expenses *	(36,928)	(13,756)	(13,359)	(7,138)	(71,181)
Adjusted operating profit	8,903	7,030	5,733	(7,138)	14,528
Amortisation of intangible assets					(6,483)
Other separately reported items					(488)
Operating profit					7,557
Finance income					480
Finance costs					(226)
Share of post-tax loss in joint ventures and associates					103
Profit before taxation					7,914
Taxation					(3,273)
Profit after taxation					4,641
Other segment information
Depreciation	731	138	173	132	1,174
* Custom Research operating expenses in the prior year includes £1,709,000 of costs related to wider innovation initiatives that have been included within Unallocated Costs in the current year.

1 Segmental analysis continued

Supplementary analysis by geography                                                     

Revenue and adjusted operating profit by geography based on the origin of the sale.

	2018		2017
	Revenue £'000	Adjusted operating profit/(loss) £'000	Revenue £'000	Adjusted operating profit/(loss) £'000
UK	31,332	12,032	27,139	8,575
USA	48,159	16,556	40,710	9,276
Mainland Europe	21,571	2,272	21,227	2,314
Middle East	12,057	3,552	16,322	2,449
Asia Pacific	8,748	847	5,512	(908)
Intra-Group revenues/unallocated costs	(5,308)	(15,585)	(3,862)	(7,178)
Group	116,559	19,674	107,048	14,528

Revenue by geography based on the destination of the customer.

2018	UK £'000	USA £'000	Mainland Europe £'000	Middle East £'000	Asia Pacific £'000	Intra-Group revenues £'000	Group £'000
External sales	30,926	48,422	21,435	9,318	6,458	-	116,559
Inter-segment sales	2,363	3,388	1,879	391	619	(8,640)	-
Total revenue	33,289	51,810	23,314	9,709	7,077	(8,640)	116,559
2017
External sales	26,766	42,595	20,126	13,523	4,038	-	107,048
Inter-segment sales	1,752	2,764	1,487	281	390	(6,674)	-
Total revenue	28,518	45,359	21,613	13,804	4,428	(6,674)	107,048

Inter-segment sales are priced on an arm's-length basis that would be available to unrelated third parties.

 

2 Other separately reported items

	2018 £'000	2017 £'000
Restructuring costs	1,381	582
Acquisition-related costs	1,193	-
Fair value gain	(1,682)	-
Profit on disposal of subsidiary of subsidiary undertaking	-	(94)
	892	488

Restructuring costs in the year included £1,036,000 in relation to the reduction of non-core custom operations in Mainland Europe and the Middle East £181,000 in relation to the Reports product line being discontinued.  £164,000 of costs also arose from the establishment of centralised global operations and finance support functions. In 2017 £265,000 of costs were incurred in relation to the Middle East restructuring process and £317,000 was incurred in relation to the global operations reorganization.

Acquisition-related costs in the year comprise £864,000 the acquisition of Galaxy DP Pty Ltd, £228,000 for the acquisition of SMG Insight Limited and £101,000 of preliminary work towards acquisitions completed after the reporting date. Further detail on the completed acquisitions is provided in Note 9 and the acquisitions completed after the reporting date in Note 27.

Following the acquisition of the remaining share capital of SMG Insight Ltd the Group's existing 20% shareholding underwent a fair value assessment in accordance with IFRS 3. A gain of £1,682,000 was recognised as a result of this review.

The gain on the disposal of subsidiary undertakings in the prior year of £94,000 arose on the disposal of Service Rating GmbH.

 

3 Taxation

The taxation charge represents:

	2018 £'000	2017 £'000
Current tax on profits for the year	5,042	2,987
Adjustments in respect of prior years	69	305
Total current tax charge	5,111	3,292
Deferred tax:
Origination and reversal of temporary differences	(1,746)	428
Adjustments in respect of prior years	(189)	(409)
Impact of changes in tax rates	439	(38)
Total deferred tax credit	(1,496)	(19)
Total income statement tax charge	3,615	3,273

The tax assessed for the year is higher (2017: higher) than the standard rate of corporation tax in the UK.

The differences are explained below:

	2018 £'000	2017 £'000
Profit before taxation	11,773	7,914
Tax charge calculated at Group's standard rate of 19% (2017: 19.67%)	943	1,557
Variance in overseas tax rates	439	1,305
Impact of changes in tax rates	(347)	(38)
Gains not subject to tax	(418)	(25)
Expenses not deductible for tax purposes	182	45
Tax losses for which no deferred income tax asset was recognised	294	553
Adjustments in respect of prior years	(120)	(104)
Associates results reported net of tax	(13)	(20)
Total income statement tax charge for the year	3,615	3,273

On 8 July 2015, the UK corporation tax rate was reduced from 20% to 19% from 1 April 2017 and to 18% from 1 April 2020.

On 15 September 2016 further changes to the UK corporation tax rates were made reducing the main rate to 17% from 1 April 2020. On 22 December 2017, the US federal corporate income tax rate reduced from 35% to 21%. These changes have been substantively enacted at the balance sheet date and, therefore, are included in these financial statements. Deferred taxes at the balance sheet date have been measured using the enacted tax rates reflected in these financial statements.

4 Dividend

On 5 December 2017, a final dividend in respect of the year ended 31 July 2017 of £2,106,000 (2.0p per share) (2016: £1,470,000 (1.4p per share)) was paid to Shareholders. A dividend in respect of the year ended 31 July 2018 of 3.0p per share, amounting to a total dividend of £3,165,000 is to be proposed at the Annual General Meeting on 12 December 2018. These financial statements do not reflect this proposed dividend payable.

 

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.

The adjusted earnings per share has been calculated to reflect the underlying profitability of the business by excluding the amortisation of intangible assets, share-based payments, imputed interest, impairment charges, other separately reported items and any related tax effects as well as the derecognition of tax losses.

	2018 £'000	2017 £'000
Profit after taxation attributable to equity holders of the parent company	8,158	4,671
Add: amortisation of intangible assets included in operating expenses	7,024	6,483
Add: share-based payments	3,571	1,488
Add: imputed interest (Note 5)	75	20
Add: other separately reported items.	892	488
Tax effect of the above adjustments and adjusting tax items*	(2,172)	(1,639)
Adjusted profit after taxation attributable to equity holders of the parent company	17,548	11,511

* Adjusting tax items in the year includes a one off charge of £374,000 as a result of the reduction in US Federal Tax rates. 2017 included a charge of £341,000 relating to the de-recognition of tax losses in Asia Pacific. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

	2018	2017
Number of shares
Weighted average number of shares during the year: ('000 shares)
- Basic	105,410	105,453
- Dilutive effect of share options	7,084	4,670
- Diluted	112,494	110,123
The adjustments have the following effect:
Basic earnings per share	7.7p	4.4p
Amortisation of intangible assets	6.7p	6.2p
Share-based payments	3.4p	1.4p
Imputed interest	0.1p	0.0p
Other separately reported items	0.8p	0.5p
Tax effect of the above adjustments and adjusting tax items	(2.1p)	(1.6p)
Adjusted earnings per share	16.6p	10.9p
Diluted earnings per share	7.3p	4.2p
Amortisation of intangible assets	6.2p	5.9p
Share-based payments	3.2p	1.4p
Imputed interest	0.1p	0.0p
Other separately reported items	0.8p	0.5p
Tax effect of the above adjustments and adjusting tax items	(2.0p)	(1.5p)
Adjusted diluted earnings per share	15.6p	10.5p

6 Goodwill

	Middle East £'000	USA £'000	Nordic £'000	Germany £'000	CoEditor £'000	Asia Pacific £'000	Galaxy £'000	SMG £'000	Total £'000
Carrying amount at 1 August 2016	1,667	19,941	8,429	10,980	569	815	-	-	42,401
Exchange differences	15	186	502	640	-	2	-	-	1,345
Carrying amount at 31 July 2017	1,682	20,127	8,931	11,620	569	817	-	-	43,746
Additions through business combinations	-	-	-	-	-	-	469	8,026	8,495
Exchange differences	(7)	(71)	(52)	(49)	-	(7)	5	-	(181)
Carrying amount at 31 July 2018	1,675	20,056	8,879	11,571	569	810	474	8,026	52,060
At 31 July 2018
Cost	1,675	20,056	8,879	12,294	569	810	474	8,026	52,783
Accumulated impairment	-	-	-	(723)	-	-	-	-	(723)
Net book amount	1,675	20,056	8,879	11,571	569	810	474	8,026	52,060

In accordance with the Group's accounting policy, the carrying values of goodwill and other intangible assets are reviewed annually for impairment. The cash-generating units ("CGUs") are consistent with those segments shown in Note 1. The 2018 impairment review was undertaken as at 31 July 2018. The recoverable amounts of all CGUs have been determined based on value in use calculations. This review assessed whether the carrying value of goodwill was supported by the net present value of future cash flows derived from assets using a projection period of five years for each CGU based on approved budget numbers.

The sources of the assumptions used in making the assessment are as follows:

·      Growth rates are internal forecasts based on both internal and external market information.

·      Margins reflect past experience, adjusted for expected changes.

·      Terminal growth rates based on management's estimate of future long-term average growth rates.

·      Discount rates based on Group WACC, adjusted where appropriate.

Annual EBITDA growth rates of 2.25% have been assumed in perpetuity beyond year five. The pre-tax weighted average costs of capital used to discount the future cash flows to their present values are Middle East 10%% (2017: 10%), USA 17% (2017: 17%), Nordic 13% (2017: 13%), Germany 15% (2017: 15%) and Asia Pacific 12% (2017: 12%).

Management has considered reasonable possible changes in the above key assumptions and performed sensitivity analyses under these scenarios. This analysis shows that sufficient headroom exists and would not give rise to any further impairment.

 

 7 Other intangible assets

	Consumer panel £'000	Software and software development £'000	Customer contracts and lists £'000	Patents and trademarks £'000	Product development costs £'000	Total £'000
At 1 August 2016
Cost	16,081	19,901	5,418	3,439	962	45,801
Accumulated amortisation	(13,167)	(14,265)	(3,751)	(3,048)	(831)	(35,062)
Net book amount	2,914	5,636	1,667	391	131	10,739
Year ended 31 July 2017
Opening net book amount	2,914	5,636	1,667	391	131	10,739
Additions:
Separately acquired	3,471	50	-	26	-	3,547
Internally developed	-	3,385	-	-	36	3,421
Amortisation charge:
Separately acquired	(2,219)	(534)	-	(8)	(60)	(2,821)
Internally developed	-	(2,726)	-	-	-	(2,726)
Business combinations	-	(226)	(562)	(173)	-	(961)
Disposals	-	-	-	-	(71)	(71)
Exchange differences	34	15	31	4	2	86
Closing net book amount	4,200	5,600	1,136	240	38	11,214
At 31 July 2017 and 1 August 2017
Cost	19,768	23,374	5,548	3,581	900	53,171
Accumulated amortisation	(15,568)	(17,774)	(4,412)	(3,341)	(862)	(41,957)
Net book amount	4,200	5,600	1,136	240	38	11,214
Year ended 31 July 2018
Opening net book amount	4,200	5,600	1,136	240	38	11,214
Additions:
Separately acquired	2,834	404	-	39	-	3,277
Internally developed	-	3,928	-	-	12	3,940
Business combinations	-	97	1,810	-	-	1,907
Amortisation charge:
Separately acquired	(2,555)	(257)	-	(7)	(2)	(2,821)
Internally developed	-	(3,519)	-	-	-	(3,519)
Business combinations	-	(220)	(466)	-	-	(686)
Exchange differences	(5)	(1)	(9)	-	-	(15)
Closing net book amount	4,474	6,032	2,471	272	48	13,297
At 31 July 2018
Cost	22,566	27,355	7,339	3,603	911	61,774
Accumulated amortisation	(18,902)	(21,323)	(4,868)	(3,331)	(863)	(48,477)
Net book amount	4,474	6,032	2,471	272	48	13,297

8 Property, plant and equipment

	Freehold property £'000	Leasehold property improvements £'000	Computer equipment £'000	Fixtures and fittings £'000	Motor vehicles £'000	Total £'000
At 1 August 2016
Cost	1,667	1,248	3,082	1,692	121	7,810
Accumulated depreciation	(471)	(502)	(2,152)	(1,039)	(78)	(4,242)
Net book amount	1,196	746	930	653	43	3,568
Year ended 31 July 2017
Opening net book amount	1,196	746	930	653	43	3,568
Additions:
Separately acquired	-	61	659	86	37	843
Disposals	-	(1)	-	(6)	-	(7)
Depreciation	(87)	(205)	(609)	(243)	(30)	(1,174)
Exchange differences	14	8	16	10	-	48
Closing net book amount	1,123	609	996	500	50	3,278
At 31 July 2017 and 1 August 2017
Cost	1,682	1,312	3,787	1,788	158	8,727
Accumulated depreciation	(559)	(703)	(2,791)	(1,288)	(108)	(5,449)
Net book amount	1,123	609	996	500	50	3,278
Year ended 31 July 2018
Opening net book amount	1,123	609	996	500	50	3,278
Additions:
Separately acquired	-	16	791	144	18	969
Business combinations	-	4	1	44	-	49
Disposals	-	(2)	(6)	(4)	-	(12)
Depreciation	(82)	(231)	(679)	(216)	(23)	(1,231)
Exchange differences	(6)	(4)	(2)	(4)	-	(16)
Closing net book amount	1,035	392	1,101	464	45	3,037
At 31 July 2018
Cost	1,675	1,336	4,322	1,909	167	9,409
Accumulated depreciation	(640)	(944)	(3,221)	(1,445)	(122)	(6,372)
Net book amount	1,035	392	1,101	464	45	3,037

All property, plant and equipment disclosed above in both the year ended 31 July 2018 and 31 July 2017, with the exception of those items held under lease purchase agreements, are free from restrictions on title.

 

9 Trade and other receivables

	31 July 2018 £'000	31 July  2017 £'000
Trade receivables	21,099	18,441
Other receivables	3,775	2,367
Prepayments	2,448	1,886
Accrued income	8,576	8,549
	35,898	31,243
Provision for trade receivables	(1,226)	(544)
	34,672	30,699

The Directors consider that the carrying amount of trade and other receivables approximate to their fair value.

As at 31 July 2018, trade receivables of £11,229,000 (2017: £10,660,000) were overdue but not impaired. These relate to a number of customers for which there is no recent history of default or any other indication that the receivable should not be fully collectable. The ageing analysis of past due trade receivables which are not impaired is as follows:

	31 July 2018 £'000	31 July 2017 £'000
Up to three months overdue	5,833	6,391
Three to six months overdue	3,833	3,011
Six months to one year overdue	823	479
More than one year overdue	740	779
	11,229	10,660

Movement on the Group provision for impairment of trade receivables is as follows:

	2018 £'000	2017 £'000
Provision for receivables impairment at 1 August	544	474
Provision created in the year	768	206
Provision utilised in the year	(97)	(140)
Exchange differences	11	4
Provision for receivables impairment at 31 July	1,226	544

The creation and release of the provision for impaired receivables has been included in the Consolidated Income Statement. The other classes within trade and other receivables do not contain impaired assets. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.

The average length of time taken by customers to settle receivables is 56 days (2017: 58 days). Concentrations of credit risk do exist with certain clients with which we have trading relationships but none has a history of default and all command a certain stature within the marketplace, which minimises any potential risk of default. Material balances (defined as greater than £250,000 (2017: greater than £250,000)) represent 40% of trade receivables (2017: 43%).

At 31 July 2018, £Nil (2017: £261,000) of the trade and other receivables of YouGov Nordic and Baltic A/S were used as security against a loan and revolving overdraft facility held by YouGov Nordic and Baltic A/S. The Group does not hold any other collateral as security.

10 Trade and other payables

	31 July 2018 £'000	31 July 2017 £'000
Trade payables	2,787	1,745
Accruals	13,808	12,887
Deferred income	12,521	10,697
Other payables	5,882	4,060
	34,998	29,389

Included within other payables are £80,000 (2017: £71,000) of contributions due in respect of defined contribution pension schemes.

 

END

 

 

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