YouGov – polling the nation

Best known for its pre-election polls, market research concern YouGov is hoping to continue its plans for international expansion.

The AIM-quoted company, which joined the junior market seven years ago, carries out a number of services across divisions such as B2B research, SixthSense, its ‘market intelligence’ operation, and BrandIndex, which claims to be able to monitor a brand’s perception at different points in time and across various territories.

YouGov was founded by the Iraqi-born Nadhim Zahawi together with Stephan Shakespeare, formerly a Conservative candidate for the constituency of Colchester. Zahawi subsequently left the business in 2010 to run for the seat of Stratford-on-Avon, which he won and currently serves as a Tory MP. Both Zahawi and Shakespeare were connected to controversial peer Lord Archer, with Shakespeare having served as his spokesman while Zahawi ran his campaign for Mayor of London in 1998.

The board includes a number of media veterans including chairman Roger Parry, a former journalist at the BBC who also works as the chairman of marketing concern and fellow AIM media play Media Square. Its non-executive team includes Ben Elliot, the founder of a number of private members’ clubs and media maven Peter Bazalgette, a key figure in Dutch production giant Endemol and a former non-executive director at Channel 4 who is probably best known in the UK for bringing reality TV series Big Brother to the British Isles.

The company, headquartered near the media hub and so-called ‘Silicon Roundabout’ at Old Street in East London, recently unveiled a solid set of results for the year to July in which the group declared an increase in adjusted pre-tax profits to £5.8 million (2010: £4 million) on sales that climbed from £44.2 million to £56.1 million.

Net cash stood at £9.4 million (2010: £15.6 million) in a year in which YouGov made a number of acquisitions that included the purchase of US market research concern Harrison Group in a deal worth $13 million (£9.1 million) and fellow American research group Definitive Insights for £3.5 million.

As Shakespeare maintains, while the company ‘has benefited from the synergies brought about by the acquisitions’, there remain ‘further opportunities still available’, noting that the US is ‘still the main driver of growth’.

Overseas, it has traditionally had a strong presence across the Middle East, with its customers including local heavyweights such as Saudi Telecom. Despite growing sales to the region to £7.5 million in its most recent results, YouGov recently announced that a long-term contract in Iraq, a significant generator of recurring revenues, was ending this year. Sales to Scandinavia leapt to £8.3 million (2010: £7 million), with the group remarking that it launched a Swedish ‘political opinion service’ in February with significant local clients including Sony Ericsson and Danish media group Egmont.

Looking ahead, the focus will be on France (the opening of a Paris office is planned for November) and ‘one of the emerging markets’, which Shakespeare hints is ‘probably Brazil’, a country he argues holds a number of opportunities for the company.

Analysts at Numis are forecasting pre-tax profits of £6.2 million (EPS: 4.8p) on turnover of £63 million for the year to July 2012. In 2013, profits of £7.3 million (EPS: 5.6p) on revenues of £69.5 million are expected.

YouGov has been on an impressive growth trajectory for the past few years, having increased revenues through an acquisitive strategy. A company that holds a significant pile of cash (£9.4 million), with strong exposure to a number of overseas territories and with plans to expand into Brazil, YouGov is one of the strongest plays in what is a weak sector. For those looking to invest in an AIM media concern, YouGov represents a good opportunity. Buy.