Good morning. This is YouGov bringing you our half-year results for the 2023 year. My name is Stephan Shakespeare. I'm the CEO. I would like to say this is the last time that I will be bringing you results as CEO, and I'm very happy to say they are results that make me proud. Our revenue for the half year is GBP 131.4 million. That is 30% up from the same last year. The adjusted profit is GBP 22.1 million, that is 58% up on an underlying basis, and the margin is up to 16.8% with adjusted EPS GBP 0.192, 81% up. These are terrific numbers to report to you this morning.
We have shown really top-line growth of very strong proportions. This, I think, is very good evidence of the strength of our products and services, and indeed our strategy. Very in line with market trends, and it's, I think, worth saying that no matter what is thrown at us, whether it's COVID or, you know, uncertain markets, all sorts of concerns about all sorts of things happening in the world, the YouGov data streams are exactly what people want, and it's very fit for market. We are seeing good growth. Our sales pipeline is healthy. We haven't seen any material changes in the first half year from our clients, in market conditions.
Although we have to say, of course, that some changes in Silicon Valley, which you'll all be aware of, may lead to some change. We can't predict that one way or the other at the moment. We haven't seen enough. We've had significant margin expansion. This is because of the operational leverage that's coming through. Over the years, we've invested significantly in panel, in analytics, in dashboards. We've templated a lot of solutions, which means Custom Research, big customer search, is becoming more and more profitable. The margins are up, and it is a bigger part of our business. All of these things are coming through from the investments that we've made, and there's a lot more to come on that.
As you know, soon we'll be having a Capital Markets Day, and we'll say a lot more about that. We're keeping this presentation fairly simple, so we're not going to say much more about what's coming from our investments, but we have been investing throughout this period. Robust balance sheet and strong cash position maintained throughout, and we are continuing to invest, as I say, in survey systems, in panel build-out to more regions, and in further migration to Cenex. You'll hear more about that from the COO in a bit. The board succession plan is going forward on time. We have a good process, and everything is set to deliver as expected.
We have 2 new non-executive directors appointed, who came to the last board meeting for the first time, and it's a really strong board. Just 1 more slide to look at before I hand over. This is really a lovely slide. This is where we started when we first started having 5-year plans and 4-year plans. Back in 2014, we had 5% margin. We're up to 16% margin now. We were GBP 67 million in revenue, and we're heading towards GBP 260 million, I guess, is what you've been guiding to. Really very strong performance, and it just keeps going, and we expect it to keep going.
It's with great pride I show you that slide, and now I hand over for more detail to the CFO, Alex McIntosh.
Thank you, Stephan. I just want to expand first on the revenue. As Stephan pointed out, a very strong performance in the year. We're going from GBP 101.2 million in HY '22 into GBP 131.4 million in this half of our financial year. On a reported basis, that's 30%. We have had some FX tailwinds contributing 11% of the revenue. 6% of revenue is coming from acquisitions, and then the rest is obviously coming from our organic operations. I particularly want to point out the UK and the US continue to be strong drivers of revenue growth. When we get to operating profit, you'll see the same from that perspective.
I just want to make a point. These are fantastic numbers in the context of the macro environment we happen to find ourselves in. Lots of questions come on how resilient we are to economic recessionary fears, particularly in the UK. I think as you can see here, we're more than resilient. We show that we can grow no matter what trading environment that we find ourselves in. We've had a little bit of a slowdown in mainland Europe partially due to lower data services revenue in that in that geography. You'll see that when we get to the segmental note. As we go into the second half, really good visibility on the second half in terms of our sales momentum. That's by design.
You've heard us talk about data products and Custom Trackers. Yeah, the economics of those offers give us high levels of visibility because clients are committed on long-term contracts. That's giving us a good base going into the second half to continue our growth trajectory. We continue to be well diversified across a number of sectors. We've seen growth in the half in our technology offer. Our West Coast Silicon Valley clients have continued to maintain spend or and some clients have expanded. I think it would be prudent to just put a cautionary word just to say we're watching how this pans out over the second half.
We have a high level of confidence we will continue supporting those clients. Last week Facebook announced cuts. We have a watching brief on that, I just want to make that point. As some of you may have expected in the half that to drop. We maintain our agency revenue broadly in line with prior year. Another area where some of you may have thought we may be at risk with ad spend and ad budgets being cut. I just want to make the point within agencies, quite a lot of our revenue comes from subscription products. Those subscriptions are well embedded into the daily workflow on the agency side.
What we've seen as we've gone through our renewal season is clients who have subscribed to data products have continued to use and continue to renew at very high levels. Great success in sports, esports, and gaming. We have a product fit that suits that market and that sector very well. Very pleased to see continued expansion, now becoming an increasingly significant contributor to the group performance. We've had a slight decline in banking and the FMCG sector. In part that's clients slowing down decision-making, a little bit. We're still seeing opportunities, but we've, we're seeing them holding rather than growing at the same pace as the other sectors.
Just a small point, we have a bit more contribution coming from the government sector due to our acquisition of Link last year, where they do quite a number of projects for the for various Swiss government departments. I just want to make a reference to the bars at the top right. You'll see the U.S. and the U.K. are by far the biggest contributors to profit in the group. We continue to have a heavy focus on the U.S. as the biggest market that we operate in. We're extremely pleased to be delivering good growth, you know, plus good profitability within the region. We've seen an expansion of our operating margin from 14% to 17%.
What that translates to is the group operating profit going from GBP 14 to GBP 22.1 in the half. I just want to make a small point to the segmental note. You'll see data products increasing and central costs increasing. As we are shifting towards more of a platform business, we're beginning to take resources that purely were dedicated to data products, they're now supporting the wider group as we prepare for our new segmental presentation, which we'll come out with in the second half. You'll hear much more about that at the Capital Markets Day, where we'll be talking about what the group looks like moving forward after this financial year.
Data products, despite some movement of costs, we have seen increase in margins due to the operational leverage, data plus automation. It means we can capture a lot of drop-through in profits when we do sell data products. You'll also see an improvement in margin in Custom, and that really speaks to focusing on repeatable work. The tracker work that we talk about allows us to capture a lot of efficiencies because we're using a lot of sample, and we're using our technology, either through automating the survey process or on the analytics side. We're taking a lot of the heavy lifting that we used to have to do. Our analytics platform, Crunch, now allows us to do things much more efficiently. Just a small point on cash.
We have no exposure to Silicon Valley Bank or small regional banks. We are very conservative when it comes to cash deposits. In the year we've had a slight decline in our cash generation percentage. In part that's because last in the half last year, we were about to do the LINK acquisition, we were aggressively pooling cash to reduce how much we would need to borrow in order to do that. I just want to make the point we did have an RCF last year, which we have paid down since then, which is a good testament to the model. Our economic model produces good cash generation. We continue to invest.
You'll see that we have spent GBP 4.8 million on panel in that supports our existing operations. We've also spent GBP 4.4 million on technology, in part, continuing on what we were working on, but also as we move into a platform proposition, we're starting to put in place the pieces already. Very similar to our last 5-year plan, we started investing for the next plan whilst we were still in the current plan. Just a small point on financing cash flows. We've spent GBP 7.7 million on the dividend in the period, and we also spent GBP 5.6 million on treasury shares. We are anticipating.
Well, we are pooling shares, to satisfy any LTIP payouts that we will make in the latter half of this year. The reason why we're doing that is to reduce the impact of dilution, by having treasury shares, to satisfy any option exercises that staff make. With that, I will hand over to Sundip Chahal.
Thank you, Alex. I am the COO, and I'll take you through the operational updates across our three main divisions. Starting with data products. Those of you that have followed us for a while will understand that this division houses our syndicated products, particularly BrandIndex and of course Profiles. Very pleased to report it was a strong period. We saw underlying growth in the period of 9%, which is up 20% as a headline figure. Just to reassure you, this is also coming off a very strong HY '22, where we saw in the comparable period a growth of 32%.
The teams worked, driven very hard to maintain those high renewal rates, particularly coming through our peak renewal season. We're very pleased with the results that we saw. We saw double-digit growth across all the geographies, with the exception of mainland Europe. The U.S. remains our largest market and grew by 10% in the period. We have seen that the strength of our custom connected offer has meant that sometimes the subscription is in fact parked in favor of the connected solutions, which are really resonating with our clients in this macro environment. We saw a limited contribution from price increases in the period, which is obviously due to some of the tighter trading environments that we find ourselves in.
We did see a significant improvement in the margin, to 40-42%. This is through a drop through from higher incremental sales and a lower central cost allocation due to that lower growth. Excuse me. Onto data services. We did see that growth in the period was actually down. We saw a decline of 9%. Excuse me, Alex, can I just get some water? This was particularly due to declines that we saw in mainland Europe. This was of course, due to the political instability that we saw in Europe. Sorry, I have a slight cold. We also saw reclassification of some of our custom work.
As you know, that Custom and data services are very closely linked, and we saw a reclassification of some of that work into the Custom Research division. We saw flat performance in the U.S. and single digit growth in the U.K. and APAC. We saw a decline in the divisional margin, as the inability to absorb that decline in revenues was due to our investment in the overall business. In Custom Research, we saw the demand for our Custom Research, due to the increased global coverage, continue to really drive our performance. Excuse me, I have a bit of a cough here.
Give me some proper cough.
Yeah. Excuse me, excuse me. Demand for that was driven by increased global coverage and the need for high quality data. Underlying growth in the period was up by 28%, and it's very pleasing to see our overall revenues were hitting GBP 65 million, which is comparable to what we saw in FY '21. The growth in our Custom Research offer has really been driven by the growth in the U.S., particularly from the tech and the gaming sector. We have seen our differentiated offer, particularly using analytical tools, continue to really drive momentum in that market. We saw some great wins in the U.K. and mainland Europe, and we also saw some great wins coming off the back of our U.S. mid-term election work. Very pleasing, we saw our divisional margin increase to 22%.
This was off the back of the migration of our work to the Cenex and a greater focus on pricing. Those of you that follow us, you'll know that we try very hard not to take projects that are very high margin and to price them accordingly, and you can see the improvements in the margin as a result of that. Over to you, Stephan.
We've already talked a little bit about where we're going with where we think we're going. We have seen some change in the speed of decision-making, perhaps as people are a bit concerned. We haven't seen an overall pushback on anything major. We have high renewal rates as before, and demand seems high. I mean, we do feel that the nature of our offer is one that is so highly suited to this market that it is perhaps less vulnerable than others in amongst our group, amongst our industry group.
We obviously are aware, this is the 3rd time we're referencing it because we just don't know what the effects might be from certain Silicon Valley companies that are big clients of ours, who may decide that we're the most efficient suppliers and it continues, or they may pause some work. We literally have no view on of that. We don't know. We are very confident overall because the strong performance in the first half of the year gives us very good sales momentum. In fact, we've never had at the end of the first half of the year as much as 70%, which is the current number at the end of the first half.
70% of our target revenue for the rest of the year already in the bag, as it were already booked. That's a high level. We are very confident that revenue and profitability will meet current market expectations for FY '23. Some of you will have in mind the stretch targets that we have. We're really not making any prediction on that. Because of the potential softness, we have no confidence about that. Neither do we think that it's beyond us. We will see what happens there.
We look forward to Capital Markets Day, where we will show you more of what's been happening with our continued investment in our technological capabilities as we truly build a platform. Not just something we call a platform, but something that is truly a platform where everything is connected. Our analytics system, our self-service dashboards, our increasing panel and panel products, and so forth. It really is a platform that we look forward to demonstrating to you in May. We remain disciplined in our investment approach, wanting to ensure further margin improvements. You know what our aim is there, we think our high aim for margin is very much within reach over the next year or so.
We expect capital expenditures to be at a similar level in this second half as in the first half, or as in the previous year. With that, we are ready for questions. Thank you.
I do apologize. I was informed that I was doing the Q&A halfway through my presentation, which was slightly threw me. I will actually start the Q&A. There's a question from Bridie Barrett from Stifel. First question is, costs, OpEx, i.e., excluding cost of sales increased circa 25% in H1. Can you help us understand how much of the cost increase was from the acquisition, how much was from wage increases, and how much was from investment? Alex, do you want to start us off?
I'm going to give very, very rough numbers. Most of the increase will be coming from hiring that we made in FY '22. You'll see in some geographical sections, we didn't grow profits as fast, and that's because we, uh, had slightly overhired in a few places. I do want to make a small point. We did make some cuts, particularly in the U.K., to try and rebalance some of that the slight Overhiring. I wouldn't say we went too far, but we, uh, we just got a little bit overexuberant as people were reacting to the great resignation.
About 10% of the increase, broadly, is coming from new heads coming in. We're getting the full year impact of that. About 7% of that is going to be coming from addressing the cost of living crisis that we had. We ensured the widest group of employees we could possibly support received pay rises in line with inflation. To address that, I think we've done a great job of that. You'll see our retention rates have been very high for staff as we've gone through the last six months. That's important. We've hired quite a number of people over the last two years. Having people embedded and contributed is particularly important.
The remainder is going to come from balance of FX and the acquisitions.
Okay. There's a question from Daniel. There's a couple more questions well that we'll come back to. There's a question from Daniel. Tax, effective rate of 21% in first half 2023.
Yeah.
Is that sustainable for FY '23 and beyond?
Yes, it is. I just want to make a point. Last year, the full year, we had an FX loss, an unrealized FX loss, in part, due to a high number of intercompany balances that we had in the group as we were establishing a more formal transfer pricing policy between the group to better manage our tax. One of the things as we mature as a company, we get more sophisticated at that policy now is in place, which is helping us reduce our tax exposure, obviously in a legitimate way, in certain geographies. You'll have seen there's a good benefit that we've been able to realize from that, and we do expect that to maintain for the rest of the year.
There's another question from Bridie, which I'll pick upon. Since you moved to a more account-focused sales process, can you update as to how this is going in terms of cross-selling or the average sales values per client? Where we have seen success, Bridie, is actually in our very large clients. We have been particularly successful in some very large international clients, buying across the piece. I still think there's a lot of work to do on the long tail, and that's something that we're really looking for the teams to improve on in H2 and beyond. Question from Andrew Ripper. Why didn't the 18% growth in U.K. sales drop through to profit? Do you want to take that?
Yeah, I'll take that. mix really matters at a geographical level. In the UK, our data services team was very high margin. When you looked at the division at a group level, that margin was diluted. The other teams weren't as profitable as the UK team had been in the past. as our growth rate in data services in the UK has slowed. what has historically been a very large contributor to high-margin profit growth, obviously a reduction in revenue means as we then allocate central costs to the UK, it's harder for the UK to absorb all the allocations in the way that it had done in the past.
We have a slight similar challenge with data products. We didn't quite get the new sales for data products that we're expecting in the UK. Again, a product that has high operating leverage, very high margin. Whilst the UK overall has performed well, that mix plus the increase in overall central costs, which we have to allocate to the UK, has meant, yeah, they've not been able to absorb those allocations as much as they had done in the past.
Stephan, can you give us an update on new products such as SurveyDirect and YouGov Finance?
We're going to wait for Capital Markets Day to talk more about that and to demonstrate more about that. We are pleased with the progress there. Indeed, there'll be other things that we'll be talking about in the new products area. I haven't seen a question on AI, obviously we are a very data-driven company. We produce vast amounts of data and different kinds of data, we are very excited about the new developments in artificial intelligence, the bots, and so on. Yeah, we will have things to say about that in the Capital Markets Day.
Thanks, Stephan. There's a question from Paul. Alex, I'll start this off, and maybe if you want to take the second part. Please, can you provide some additional color on the profile of your technology clients? Are they predominantly established profitable companies, startups, or a mixture of the two? Can you provide color on the type of relationship that you have with them with regard to split between subscriptions and custom? I'll start us off, Paul. It's a relatively easy answer. We sell right across the piece, but these are companies that you would be familiar with.
In terms of certainly some of the larger established companies in Silicon Valley, but even now in terms of some of the newer entrants, we're very pleased to say that our team is very well known in the tech sector. Even relatively small tech companies with high profiles are still using our services. Right across the piece and obviously at the very top end, we have very large scale relationships with the big boys per se. Alex, can you tell the audience a little bit about the relationship you have then with regard to the split between subscriptions and custom?
Yeah. Yeah. For the majority of our tech clients, I'd say it's probably 50/50 subscription and some form of custom tracking. I say typically. What we are starting to see the benefit of is, you know, clients, people who've been using our products and services on the client side as they have moved around, have moved to other smaller technology companies which still have a high level of brand awareness globally, who have then started picking up. It usually starts with data products. We have a little bit of a network effect of being able to pick up more subscriptions as people move around the industry. Some of our technology clients started with data products, but now are more weighted towards Custom Trackers.
That's something that we expect to see across an increasing number of our clients. The data products allow us to build credibility immediately with a new client because it is the best quality data. Clients typically spend the majority of their budget on Custom Trackers, this is a great way of us essentially leapfrogging a couple steps that we would historically have had to make to try to get to big tracking work. Some of our larger technology clients, it is more weighted towards Custom Trackers. What they're doing is many different types of projects that they're doing on a monthly or quarterly basis, but also then doing those in lots of countries. That scales up pretty quickly.
There's a question from Jonathan. I think, Jonathan, you said. Well, the question is, can you expand on why the U.K. data sales didn't materialize as expected? I suspect that might be U.K. data services sales. I'll start us off. It's, it's to my slide on data services. We did see an impact across the piece on data services due to essentially the war in Ukraine. What happens then is that political instability means that the newspapers are dominated by the news, and we do have a long tail of PR clients in that sector, and they obviously cut back on spending.
There were also a cutback in terms of some of the government spending that we saw as well. They are also a big buyer of those services. There's a question from Fiona. Has there been a stabilization in data services in Europe? Again, I'll pick that up, Fiona. To Alex's point, what we do see is that there is a very gray area between data services and custom. Increasingly, our work is essentially could be bucketed in one or either of those divisions. I think going forward, we may start looking at that as research.
I'll pick it up.
Yeah. I'll tell Alex. You say?
No, I'll pick up. Oh, sorry. Finish your point. No, no. I'll
What we have seen is that we're pleased with how that's progressing into H2, but increasingly it's less about classifying it as Data Services or as custom as more about research.
Yeah, let me just build on that. In the past, we've tried to explain the differences between particularly types of custom that we're doing and also how that, you know, compared to data services. We are coming out, as you know, with an expansion of what our new strategy will be in Capital Markets Day. In that you'll see an evolution of how we go to market. I just want to make this point. We will report under this segmental analysis for this year. We are now stretching this, in terms of internally, we increasingly look at custom and data services as one team. I'll make a point in the U.K. that has just recently been reorganized into one team.
The reason why that's an important point to make, historically, we had dedicated sales teams for each division. Now we have a sales team that sells across the piece. Part of the weakness in some geographies is not, it's not true weakness. What it is clients like PR clients slowing down. In the past, we would have just ground out more sales and data services. We're taking the path of least resistance within our sales team and selling more custom because that's where it's, we're getting, obviously good performance there.
I wouldn't read too much into these numbers, in terms of this is all completely market-driven, because some of it's just the nature of our sales team and our marketing web team, where we're increasingly just positioning it as it's research that you're buying from us.
Question from Fiona. Has the Cenex program got more to deliver? I'll start, Fiona. Cenex has still got areas of the business in which it can essentially help deliver more, and I think we are still scratching the surface, particularly on the tech side. That really is a focus for us in the remainder of H2 and beyond, and also on the graduate side as well. We do have large teams now across all of the Cenexes, but one of the areas where we've not focused on is on that early careers pathway. Certainly in terms of holistically, there is more that can be offered there.
I would just add, that with the self-service platform, and obviously this is more for Capital Markets Day, but in very general terms, we are looking for, and this also speaks to the data services number becoming sort of spread across higher level custom and actually automated custom in self-service, that we are expecting to have an offer that really takes you from no help at all, purely automated self-service from the dashboard, all the way to the, you know, very customized expert help that you get from for our biggest clients that have specialist trackers and so on. In the middle of that, there is a much more templated solution for a lot of customers.
That will be increasingly handled by Senex, by people who are expert at using very specific standardized formats, which are somewhere between self-service and full customization. So Senex has a vital role to play there. That will, I think be a fairly unique offer as well, that complete range from one platform.
A question from Daniel. Alex, do you want to take this one? It's, what scope is there to raise prices across the various parts of the business, and how receptive are clients to increases?
I would say it's mixed. It's easier obviously for us to do with new products and new sales to new clients. One area where we're pushing up slower is in renewals. Quite often it's more of a negotiation, particularly if we've had clients that have been clients for a very long time in the subscription business. In that, we're taking a slightly softer approach rather than being very hard line. We're more negotiating increases where we can do. At certain intersections, there is a high level of competition in our world. The challenge for us is not to raise prices, but to demonstrate to clients, you can't just compare price per question between one supplier and the other.
There's a quality component that obviously drives what we do. We are increasing prices in certain parts of our data services business, and we're doing that because we have established ourselves as the quality player. We don't have that reputation in every single market that we're in. In some markets, the brand is very strong and people come to us because they want quality rather than they're coming because it's they're driven by price. I think over time, we will increasingly get more sophisticated at this as a group. We have obviously a huge number of operations in lots of countries.
I can't say we're universally great at this, but I think in a few markets we are definitely improving and taking advantage of the ability to increase prices.
Thank you, Alex. Two questions here from Brian. Alex, if you take the first one, and then Stephan, I'll give you the second one. Just coming on the back end of a first question, what do we expect OpEx in H2 to look like compared to H1?
Relatively similar, with the exception we don't quite. I'm giving a slightly hashed answer here. We are increasingly trying to hire developers. It's still a very tight labor market. When we look at where are we trying to add roles for the rest of the year, it is in that technology team. Elsewhere, we are hiring into the Senex to support future growth, which is not as difficult as it has been to get all the developers that we need. In that, there'll be a mix of the type of work that they're doing, whether it's OpEx or whether it's CapEx. We anticipate a slight increase in OpEx going into the second half.
I do make the point, we made some selective cuts in over the last few weeks, just to balance some of our geographies.
Stephan, second part of Brian's question. Now that Link is integrated, are we on the lookout for other Bolt-ons?
Well, as you know, our acquisition strategy has been both strategic and opportunistic. By that I mean that we are open for and looking for things in the data and tech space that fit what we're doing. That's on the strategic side. When something comes along that speeds us up in a region that we want to speed up, we'll be interested in that as well. I won't say we're actively looking for the second type. That kind of depends what comes along, because our focus is obviously heavily on the US, and secondarily the UK. That we're not actively looking for that, but were something to come there, we've had good experiences of that, and we could do more of that.
The other space I think is more strategic for us, which is data and technology.
Thanks, Stephan. I think this is the final question, unless someone sends one in pretty quickly, and it's a good one to end on. Stephan, I think this is for you. How many CEO candidates do you currently have in the search process? Sorry, this is a question from Andrew. When do you expect the process to conclude?
Yeah. We've got a very good process in place that we've worked out with our advisors, Egon Zehnder. It's a strong process. We are very much on time with that. We've said that the handover will occur sometime around, but probably exactly on August the first. We're confident in the process. We're confident in the timetable that we're going to make that date. That's obviously all I'm going to say at this point. Thanks. With that, I think we'll end because we have no further questions. It's been great talking to you and it's been a good, whatever it is, 23 years of doing this, so. Well, not quite in the public bit, but anyway, terrific to see you. Thank you very much. Bye-bye.