YouGov plc

Hello and welcome. Thank you very much for coming. Now, I realize you're very much focused on the numbers this morning, but I want to start with this key message. Next one, there we go. I realize, as I say, you're focused on the numbers, but because I think so many people in the market believe AI is a problem for us, I want to emphasize this. We certainly believe there is great disruption in our industry, but this will favor you guys, favor us, not harm us, as we are investing in AI to maximize that opportunity. So, it's against that background of expected disruption that we have shown incredible resilience. We've reported revenue up by 2% to 194.8 million when most companies are flat or down. We're showing the statutory operating profit up by 14% and statutory profit before tax up by 14% for the revenue and profit up by 4%. Data products up 2% like for like that is excluding a discontinued product, and adjusted profit is down from half-year to 24 million, reflecting essential investment in shoppers' data-gathering methods and also investment in AI. Earnings per share is 11.4 pence, and the balance sheet is solid at nearly 33 million, positive with a negative leverage of 2.1. Profitability of course is affected by investment, partly in shopper, to keep it competitive, and partly in AI to transform the company. to be pretty extreme undervaluation of this company. We do intend to have a share buyback after refinancing. And while the macroeconomic environment remains uncertain, clients are continuing to prioritize the high-quality human data and strategic research projects that are where YouGov continues to be strongly positioned. This is a quick reminder that we had 15 years of growth, proven by innovation. That is the DNA of this company, and as I will show you a little later, AI is driving some amazing innovation at YouGov. We've launched an add-on to brand index, voices, renewals have been steady, and in the new year as in the old year, we've hit record highs for a single subscription, in this case, to a major tech company. In research, we've had strong performances, especially in banking and retail and in all regions, especially in America. A particular favourite of mine was a major study of perceptions of AI across the US for Anthropic, which they released as a major public report. With Shopper, we've expanded and upgraded our panels and we've added a new method for data collection, which was essential to be competitive in a changing landscape. And given the severe undervaluation of this company, we are conducting a strategic review of how shopper best fits. I now hand over to my colleague, our CFO, James Davis, but let me first say what a pleasure it is to be supported in our transformation by such an experienced, talented, and determined individual. James.

Thank you, Stefan. Hello, everyone. I've really enjoyed my first month as CFO of Yuga. This is a great business with passionate people around the whole globe. It has an exceptional platform and brand, although we are not optimizing its potential. And there is a lot of work to do. Yet we are not as efficient and streamlined as I would like us to be. Five weeks in and I am seeing many areas of productivity and efficiency improvements that must be executed. These are all within our gift. We are not yet embracing modern ways of optimising the value we can derive from our market leading panel and trusted brand. This doesn't just relate to cost cuts, but also more efficient ways of working, collaborating across teams and countries, and with a much sharper focus on how we actually optimize margin across our diverse product range. We're in the process of improving the discipline across the business in all of these areas, as tools, market dynamics, and competition have evolved. My roadmap is filling up nicely, although my main priority is to focus on growth in the right markets, margin enhancements on a group-wide basis, and to bring back agile ways of working. Yes, we are a listed business, although this doesn't mean we can't be slick and entrepreneurial, focusing heavily on maximising returns on every penny of investment. I don't plan to spend too long looking backwards today. I want us to look forward, and I will be announcing shortly our value delivery plan. The value delivery plan is a full reset plan. However, I will spend a few minutes going back through the segmental P&L performance, along with some data points around our balance sheet and cash flow, before moving on to H2 26 and beyond. As Stefan alluded to, the market research and agency sector is in a tough patch at the moment, and growth is being compromised for many reasons, including budget constraints. However, our products and reputation means we remain highly relevant, and we continue to grow top line by 2% year on year. There are not many businesses in our sector or adjacent sectors that can say that. Many are declining in high single digits, let alone growing in single digits. I particularly like the graph Stefan ran through earlier, showing 15 years of growth. That is very impressive stats for a business of our age in the sector in which we operate. Research has been a star performer, with data projects and shoppers stable from a top-line perspective. Moving on to adjusted operating profit, there are three themes. Firstly, when we compare strategy measures, not adjusted measures, operating profit is up a healthy 14% year-on-year. As a principal, like many of you, I do not like adjusted measures. It can mean a reader can't see the trees, although I am reassured that our statutory measures have performed well. Also, separately identified items are much lower this year relative to last year. There will, however, be separately identifiable items as we progress through the value delivery plan, which I will talk through shortly. However, I commit that the threshold around adjusted measures will be much higher. and communication much clearer going forward. So theme two, the data product division continues to perform very well with an even higher margin than an already attractive margin of 30% that we achieved last year. In this half, we were at 35%. This is very encouraging. Theme three, material incremental investment in shopper of over three million pounds in H1. This is the main reason for the adjusted operating profit reduction versus last year. This investment does continue into 27 and 28. However, we do see revenue benefits hitting us in the 27 financial year. This investment is substantial, but it is imperative we introduce this now to enable semi-passive and passive data collection, as well as to expand and upgrade panels across Europe. This investment is intended to support its growth trajectory and competitiveness, and we're already seeing early success in improved client delivery and new opportunities. I'll come back to operating property in a bit more detail shortly. Moving on to revenue by region. Three of our four regions drove revenue growth. America's sector focus was proven fruitful, and despite the political calendar going against us this year, 2% growth was still achieved. UK and Asia Pacific also grew nicely. Mainland Europe. This is our largest revenue contributor, and it was flat year on year. The larger, more strategic European countries performed well. Although some of our smaller fit points could decline, for example, in Nordics. As we go through the value delivery plan later, we'll be focusing on areas that perform well and areas that we need to improve performance on. Some of the smaller European countries most definitely fall into that category. There is a slight timing difference for shopper, but I'm confident the H2 growth will be as good if not better than expected for the shopper business. And we will return to year-on-year growth for the European region by the end of the year. Moving on to customer base. Our customer base remains resilient and from a sector perspective, nicely diversified. Technology remains our largest segment and continues to deliver growth. On top of the detail on this page is the FMCG aspect of Shopper. This page just shows YouGov core and excludes shopper. So when you add in shopper, this is an even more attractive picture. Cash generation. Cash from operations is three million pounds lower than last year. That is less than the reduction in adjusted operating profit. Cash conversion efficiencies are supporting this cash conversion measure too. However, I've been here four or five weeks. One area I need to focus on more is to improve the cash conversion and focus more heavily on working capital improvements and smoothing as we go through the next few quarters. Our business is very seasonal from a cash flow perspective, as many of you will know. Moving on to the balance sheet. Since H125, we've paid down €20 million of our term debt, which occurred in October of last year. The next payment is for the same amount as due in October of this year. However, I'm delighted to say that we have already commenced our refinancing exercise for both the term loan and our fully drawn RCF. Our debt ratios, re-net debt to EBITDA and interest cover, are both well within the terms of the current loan docs. I'm not concerned about liquidity for this business, although I am looking forward to doing a refinancing which will better reflect the structure and needs of the balance sheets as to where we are at the moment. Moving back to operating profits, I was keen to do two bridges. The first one is the H1 bridge. This is basically the only story of H1 this year versus H1 last year. The chart you'll see shows a 6 million reduction year on year. Half of this is due to the additional shopper investment already communicated. The 3 million represents the incremental level of shopper investment in H126 versus H125. In H2, a further delta is expected to be a gain of circa three to three and a half million pounds, with further investment in 27 and 28, but as explained, we do start to see returns coming in in 2027. I could develop a narrative which says that the further year-on-year variance, also of three million, is due to a clear and specific investment program in UW Core. which would deliver very clearly defined returns in 80 years. However, I won't do this. I see this earnings variance as being broadly in the normal course of business. Yes, there is investment in our platform and tech footprint, but there is also a £1 million additional cost to the significant progress we've made in the shopper workstream. However, I class this extra £3 million as ordinary course activities. So to conclude, on H1, we are three million down due to extra costs that have been incurred. Moving on to H2, so I'm now starting to look at the future following the explanation of the past. Last year, H2 was flat with H1. This year, we will see growth in adjusted operating profit in H2. We are guiding to an adjusted operating profit outcome for the full financial year between £52 and £56 million, which gets us into the bottom end of the consensus range. Let me talk you through the chart below on screen and I can explain why I've communicated the range. Shopper investments of approximately £3 to £3.5 million will be incurred in H2. We also have £2.2 million of additional costs in the second half. This is a consistent theme to H1 in that the year-in-year delta is due to shoppers, TSAs and platform investment in the core business. Again, not specific enough for me to take out as an investment variance. Plus, we have a benefit of no less than £1 million, which I am calling margin improvement or value creation in H2. What do I mean by this? I mean, as of now, I can identify this uplift relative to last year. I have very high conviction of achieving this number. This number gets us to the bottom end of our range. My work on a more specific year-end out-earn is ongoing and there are initiatives in flight which could mean this value growth margin enhancement could be up to £4 million higher. This will get us to the 56 number. We will be working hard over the coming months to optimise where we end up. However, I'd like to be very clear that we are not solving for an optimum FY26 operating profit. we are sold for a value optimising 2027 and beyond. You'll be very clear at the year end around how and why we ended up at the final position within this stated range. I also wanted to highlight that by simply taking out the shocker investment, the guidance for the year would be between 58 and 63 million pounds. I want to reiterate that I could take out 3 million of Yuko Corp to add to this number, but I won't. This is normal course of business under my definitions. Moving on to the value delivery plan. We have covered historical numbers and the outlook for the financial year, but I want to talk about 2027 and beyond, because this is where it gets really interesting. I'd like to front load some of the detail that Stefan will go through shortly. There are three ways to our value delivery plan. This is a plan that we've kicked off in the last few weeks. Stefan's section below is going to mainly cover wave three and parts of wave two. But let me go through my version of each wave now. Wave one. As I mentioned, I've been at YouGov now for five weeks. And I was very keen to ensure that we could land some key messages with conviction today. I wanted to be able to provide confidence that we are taking all appropriate actions to optimise value and earnings. I do not want to sit here today and say, I was going to do this, I will do that. I want to say that I have done something already with the full support of the board. So we've already actioned annual run rate margin optimisation of £2.5 million. where we have eliminated a chunk of cost and several inefficiencies, predominantly in non-revenue generating areas. This is real, and I'm delighted to say that Wave 1 of the VDP has been completed. We are just starting this new focus of executing at pace, and this will continue. Wave 2. This kicks off next week, which is needed to get the business back to where it needs to be. Gone are the days where the solution to every problem is to increase headcount and further inefficiency and to less focus on accountability. This is stopping and will stop in its entirety very soon. I commit to providing an update on wave 2 at the capital markets day in the summer. It won't be complete by then, although it will be reasonably advanced. The earnings uplift from wave 2 will be a multiple of the value of the wave 1 uplift and a chunk of this benefit will hit the financial year 2027. The combined impact of the first two waves is expected to deliver an annualised adjusted operating profit margin uplift in excess of 350 basis points relative to the margin achieved in H1 FY26. This is once it is fully executed. For example, if we manage to fully execute this before the year end, the full benefits of this uplift will happen in FY27. If it does not all happen before the end of this financial year, there will be elements of this enhancement within FY27. Again, looking forward to giving more updates on this in the Capital Markets Day and at the full year results presentation in October. In Wave 2, as you can see from the graph, that's where we start to implement the AI transformation program. Wave 1 with nothing whatsoever to do with AI. Wave 2 is partly to do with AI. And Wave 3 is fully to do with AI. So moving on to Wave 3, this really is the exciting piece. And Stefan will go through this in detail shortly. This wave represents the material evolution in how we win, operate, and serve clients. Wave 3 is expected to deliver a margin profile aligned with an AI-led data business, making a step change from our historical margin structure. I can't yet quantify the specific financial shape this will result in. However, I'm starting to get an inkling as to what this could look like, and it's very exciting. We will be sharing further detail on this in due course. I'd like to pass back to Stefan to go through Wave 3 and many other topics in more detail.

Thank you very much, James. Yeah, so look, the AI disruption is not only about big operational savings. The bigger picture is that the age of AI demands exactly the kind of data that YouGov delivers so efficiently. And I'd like to remind everybody that it was YouGov that first built an engine for automated research data at scale. By the way, they're still the only ones that do this. Since 2007, for 19 years, Brandindex has been selecting sample, running daily surveys, processing the resulting data, and delivering it to an analytics platform without any human intervention. It's all automated and has never broken. That data goes into our data lake, which is structured and called the cube, and it generates a variety of products, including Brandindex profiles and ratings. So this single source human data is our moat. Nobody else has it, and nobody else can do it quickly. And that's what I mean when I say that disruption in AI will disadvantage most companies, but it will massively benefit you guys, because the advantage for us is inherent in our data generation engine. A couple more specifics about that disruption, which to us is very welcome. On the left, individual samples will be commoditized. People say to me sometimes, aren't panels just becoming a commodity? But we have to differentiate between supplying mere samples and having an engaged panel. These are different things. An engaged panel that builds a constant stream of connected data is not just like, give me some sample. Our panel is a quant-quo and behavioral single-source data system. Then there's the human operations that are required for old-style conventional research. With YouGov, this will be 100% end-to-end automated. We already have the prototype running right now, and LLM has direct access to our system and can create its own machine The only human bit is our panelists talking directly with the bot. And then there's the consultancy part, which is, of course, a huge part of the market research industry, that has always been unscalable. And like most forms of consultancy, it would be directly replaced for the most part by AI. Expertise in using the system, yes. Expertise in deploying the data, yes. But for consultancy as a whole, that's a no. This is a dynamic engine for premium, connected, structured universal human data. It's a utility for everyone to use. I'll be quick on this slide. You already saw it six months ago and it's operationalized now. It shows tens of thousands of people every day not only clicking on brand index questions but then talking about them afterwards and adding the qualitative why data to the qualitative what data. So you get the moving lines and the transcripts of the dialogues from the same humans. And the first outing for this was You've Got Voices, that we launched a few weeks ago and that has aroused good initial interest, but it's only scratching the surface of what's coming. This is the new operating model for generating the most relevant human data, made dynamic by AI. It's a learning loop. The left-hand side of the diagram is the flywheel of the data generation which has been going for 19 years. A global panel automatically serves surveys. This is number one, the top pillar. A global panel automatically serves surveys that go into a structured data lake. Number two is the dynamic data collection. Number three is the data lake cube, which is structured and contains All of that data in a form that generates trusted data products, that's number four, and that's served up into dashboards and an analytics platform. Now directly to LLMs as well and to AI systems. That bit on the left, the five pillars, is the YouGov system for generating our connected data. But now we add the dynamic part on the right hand side, a learning loop. So on the right hand side you've got this data seek engine, which looks at the data and decides what data is needed, and an AI analysis system that works out what the uncertainties are in the data. and what then is needed in order to fulfill that. And that goes back into the flywheel as it were. It changes the dynamic data collection and means that we can update the queue. So let's put it this way. Imagine you have an unbroken straight trendline and then new data starts to look as if it's a movement away from that trendline. That will be detected and it will mean we will increase data collection to make sure that our imputation model and indeed the consistency of the trends is understood and then corrected or updated, should we say, in the model. That will generate an automatic alert to users and will be a trigger for new research, no doubt. This is a new way of seeing research, not as a series of surveys, not as a series of disconnected bits of insight, but as a model of your market that is continuously updated in an intelligent way without you having to do anything and getting the alerts for what's happening, what's changing. So that's the revolution that's coming and it will be pioneered by YouGov. The internet revolution in research was pioneered by YouGov. And this is what excites me and what is coming down the tubes faster than you might expect. But it all exists and we're going to the next stage with it. So finally, I would like to introduce our new chairman. And I have so much experience in my industry that I want him to succeed me as CEO when the time comes, but sadly, he turned me down. Our new chairman, Ian Griffiths.