YouGov plc

you very much everybody for joining us this morning and thanks as ever to our panelists and how on every minute of every day around the world they're sharing their opinions to help us fulfill our mission and to help us create great value for the businesses that we work with this morning we published our results for the 12 months to the 31st of july 2024. i'll give a quick recap in a second and obviously we'll go into more depth over the next half hour and then be open to questions And FY24 itself has been a year of transition, it's been a year of challenge, and it's been a year of change for the industry and with us here at YouGov, with the businesses experiencing a number of successes and a number of challenges throughout the year. Now, today we report revenue and operating profits slightly ahead of our revised guidance. Across the year, we made significant strategic progress, including the acquisition, the conclusion of the acquisition of CPS and KnowledgeHound, enabling us to bring new technologies and new offerings to clients, as well as just, I think technically everybody counts FY24, FY25, bringing Yavel into the organization as well, together with a number of senior hirings to help us be even more competitive in the year ahead than the year before. The execution of our cost optimization plan is on track and we're confident we've got the right plans in place. We're focused on the long-term growth and our SP3 delivery. Overall, we expect YouGov to return and achieve growth in FY25 in line with the current market expectations and a margin more aligned to those that YouGov has historically delivered. and remain confident we're going to deliver on the long-term ambitions for the company. Now, quick click on the disclaimer, please. Great, I hope everybody has that. And then onto slides. So today, we're going to split this into two halves. Alex, our CFO, who I'm joined with, together with Hannah, our Head of Investor Relations. Alex is going to take you through the front half, kind of full financial update. And then in the second half, I'm going to go deeper into our product plans and our growth plan throughout the year. unpacking in detail how we're thinking about and how we're going to deliver even more value for clients, be even more competitive in the year across our data products, CPS, and our research division. And with that, I'll hand over to Alex.

Thank you, Steve, and good morning, everybody. Just before I get started, just a quick note to say you'll note our numbers are unaudited. Our auditor has requested a bit more time to get through their files. We don't anticipate anything material changing in those numbers, and so we took the decision to come out with unaudited numbers, and we'll be releasing audited numbers in the near term. As Steve mentioned, the two acquisitions, the acquisition of CPS clearly has been the biggest contributor in the year, but there's been a number of other operational highlights for the year. We've mentioned that we were increasing our commercial rigor. We've made some commercial and product leader investments to help accelerate our growth, addressing some of the challenges we've seen in data products. I'm really pleased to have completed three really important acquisitions in the year. We spent quite a bit of time in the year looking at panel quality. Those of you who are familiar with the industry will note that some of our competitors have had significant issues with fraud and that really affecting client data. We pride ourselves and continue to and sort of position ourselves as a very, very high quality premium end of the market. And we're really pleased to be maintaining that position with the work we've done in the year. And as Steve mentioned, we updated on our performance at the back end of July. We announced a cost optimization plan to remedy some of the It's a slowdown in sales momentum that we had at the back end of the year. The results of all that is we're reporting revenue of $335.3 million for the year. Adjusted operating profit is $49.6 million. And EPS is $29.4 billion. We've had varied performance across the divisions. You'll note with the acquisition of CPS, we've adjusted our segmental analysis to include CPS as a standalone division within our segmental notes. On an underlying basis, we continue to see relatively flat performance in our data products. We see really good renewal rates from our existing clients that really has been a challenge around winning new clients, new logos, so to speak. And we'll speak later on in terms of what we're doing to address that. One important point to pick out here is we've seen some good growth in our custom team. So our research performance of 5% growth is two services that we offer clients, custom research, which includes a lot of long-term tracking studies that we do for clients, as well as fast turnaround work. We've mentioned this before in the past, the industry is seeing a structural challenge for that fast turnaround work, but we're really winning in taking share from larger competitors and winning an increasing amount of tracking work from our clients. yeah that's been a strategic initiative for us for a couple years now and we'll go into well impact that a little bit more detail as we go through this presentation. In our absolute numbers, you'll see the EU is now our largest territory. That's as a consequence of doing the CPS acquisition. The numbers that you can see next to the columns, those are the underlying growth rates. We're incredibly pleased with achieving an 8% growth rate in the US. This is well ahead of some of our competitors. So the US market has been particularly challenging for them. And what that speaks to is where we have client relationships, where we can really show them the benefit of all the different You've got tools that complement each other, and we embed that within the research program. We can win with those larger clients. Within the rest of the group, a bit of a challenge in EU. We've had some leadership challenges through the year, which we highlighted, and we've taken some actions to remedy that and return them to growth. The UK has performed well at 3% on the back of a difficult sort of backdrop within the market. We've had some specific challenges in Asia-Pac where we've had a slowdown in government spend with one of our clients. But just to reiterate the point, America has continued to be our number one priority market and we continue to make good progress there. And we remain very well diversified across a number of sectors. The stacked columns are UGOVs sort of excluding the CPS acquisition. There's sort of clear standouts from this as we continue to see our technology clients expanding their spend. And that really speaks to clients that value high quality data that can be embedded into their workflow that continue to use us more. And we've also made some great progress with our agency clients, in particular, expanding our data products and their data products usage, either extending into new markets or getting agencies to take more data as a complement to their data subscriptions. When we proform this, and next year we'll have a full year of CPS, we'll see FMCG being our biggest sector, and that's in part the types of clients that CPS sells into. We'll also pick up on that later. Really pleased with how the CPS acquisition has gone. Really supportive clients as they've gone through the carve-out from GFK, and we continue to see clients on the CPS side renew very strongly. And we maintain a robust balance sheet and our leverage as a ratio of 1.7 is in line with our expectations. In the year we took a 280 million euro facility to fund the acquisition of the CPS transaction. As a reminder, we needed to move very quickly on the acquisition with no no conditionality on the offer, and the best way for us to do that was to fund that primarily through debt. Our anticipation is we will continue de-levering over the medium term as we pay down that loan. We've already made the first principal payment on that, and we'll continue to de-lever about half a turn every six months. In line with having debt, we've proformed our cash conversion, which is stable on the prior year. We've clearly had to pay out some non-recurring costs to do the acquisition. So we've seen our cash conversion remain relatively stable at 94%, going to 93%. In terms of our capex, you'll see that has increased within the panel recruitment. That's including the CPS transaction. The CPS team recruits panel in a similar way that we do, and not at the same volumes for the type of panel data collection work they're doing. But nonetheless, it is a similar treatment to us. We have spent a little bit less on technology in terms of capital expenditure. That doesn't mean we're spending less overall on technology. We've been spending more time with some of the teams on maintenance activities which don't classify as as our deal for product development. We anticipate maintaining the overall capex spend in line with revenue going into next year and it's important that we continue investing in new initiatives to set us up for increasing our growth rates into FY25, FY26 and beyond. Just an update on our cost reduction plan. We announced that in July. We announced an annualized cost saving plan of $20 million. That plan covered a number of areas. It included right-sizing teams, optimizing our panel spend, and reducing third-party supplier costs. We expect 70% of that to be realized in FY25. You'll see in our accounts, we have a provision of 3 million to cover the cost of that reorganization and restructuring. The other part of that is making sure that we're investing in FY25 and ensuring that we're increasing and getting ourselves back up into some positive growth and momentum, particularly in our data products. You've heard us talk about some of the initiatives we have in enhancing the user interfaces and user experience for data products. That's well underway. With the acquisition of Yable, that expands the work that we're doing in AI and machine learning, and we'll have some announcements through the next financial year on how we're doing there. But clearly, we also want to make sure that we're bolstering our teams in the priority markets, and that particularly includes the US. So just to recap some of the words Steve had at the beginning of this session, we do expect to meet our FY25 expectations. Trading is in line with the first quarter compared to the last quarters of the previous financial year. That reflects our slowdown in sales momentum. The group has gone through the reorganization work. We've had to run consultations in a couple of markets. Those are all coming to conclusion, and so we look forward to the rest of FY25 executing on our plan. We're very pleased with the way the CPS integration is going. It's in line with expectations. The important point here is we're still operating under some TSAs, some Transfer Service Agreements, with the seller, and so we're looking at rolling off the majority of those by the time we get to the end of FY25 and then really moving forward with the integration proper with the organization. We are expecting to see our sales momentum pick up in Q2 and beyond and seeing our performance tick up in the second half of the financial year and particularly driven by our custom teams expanding on the type of work that we've been highlighting has been growth for us. We continue to have a strong discipline around capital allocation. I make this point again, it's very important we're investing for growth. We see a number of opportunities, particularly in expanding the panel quality proposition, but obviously augmenting that with improved data products, improved client servicing, And so we continue to execute on our plan, which is a highly cashed energy business that allows us to continue delivering the debt that we've taken and continuing to invest in future opportunities. As I mentioned, we'll be keeping CapEx in line as a percentage of revenue on the prior year, and we will continue to retain strong cash balances so that we, as I say, can invest in the group.

I'm going to start this business update by laying out where we see the competitive landscape. That's something that we've heard consistently back, which is to help understand where does YouGov sit within what is a very fragmented and a continuously growing landscape. And then I'm going to take you through how we're thinking about the three pillars of our growth across the next 12 months. So in our data products and CPS, and then into our research division. I'm not surprised to some extent we get asked kind of questions around the competitive landscape. What does it look like? Because it's ever expanding and ever changing. For those of you like me that like a lunascape, it wasn't that long ago where you could have probably fitted everything onto a kind of decent size of A4, you know, These days, a one or even a kitchen table probably wouldn't be adequate enough because it's a market that does generate a high level of interest because of the size and the scale that it operates in. Now, overall, the total insights market is in the region of 140 billion. For our perspective, the total addressable part of that, because some of that is within customer experience and the aspects that we don't operate in, is around the 54 billion. We're currently at a 0.7% share. Obviously, for some of our clients, we're significantly higher than that, which gives us the runway to think about applying that strategy over time to other clients. But we clearly have a good headroom for growth, particularly in an industry that's becoming increasingly fragmented, even more so than when we talked about this in our CMD last year. We compete with companies of all sizes. Some of those are very well-known names that have been around for decades. And some of those are kind of smaller organizations as well. So it's no doubt it's a very competitive sector that we operate in. However, it's also a sector that's quite clearly delineated between high and mid end and the lower end of the marketplace. And certainly that lower end is not where we see our kind of growth potential to come from. Our focus is on the mid market and the kind of upper end for global brands that many people on this call would would recognize. So we still do see the kind of low penetration represents a large opportunity for us, not least of all with our existing clients. And I'll touch on that in a second. For almost all at the mid to high level, the question of data quality is increasingly under scrutiny and a real positive for YouGov. Now, that's certainly been the case over the last 18 months where we've seen the awakening across the industry of questions around the validity of data, the validity of panelists. and earlier this year we took the leading position in the industry about publishing our white paper on how the industry should introduce the kind of tools and the systems and approaches to make sure that there is a validity and that data is critical for the industry that is trusted And there's no doubt that YouGov is preeminent in that level of trust that we have. It's also true that that quality of data has an enormous impact in the ability to compete in a future world that becomes more machine learning and AI driven. Those models rely on two things. high levels of computing power and high quality, refreshing data that people can trust and can be utilized in different ways. And I'll touch a little bit about how we're thinking about an application of AI across this year as well. But there's no doubt kind of panel quality remains preeminent for us. And in fact, it's kind of we are very I'm sure everybody is well aware, but we most we most acutely are well aware that we're speaking to you seven one now one week away from the US election.