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Edited Transcript of YOU.L earnings conference call or presentation 2-Apr-19 8:30am GMT

Half Year 2019 YouGov PLC Earnings Call

Apr 10, 2019 (Thomson StreetEvents) -- Edited Transcript of YouGov PLC earnings conference call or presentation Tuesday, April 2, 2019 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alexander George McIntosh

YouGov plc - CFO & Executive Director

* Stephan Shakespeare

YouGov plc - Co-Founder, CEO & Executive Director

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Conference Call Participants

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* Fiona Catherine Orford-Williams

Edison Investment Research Limited - Director & Sector Head Media

* Jessica Pok

Peel Hunt LLP, Research Division - Analyst

* Johnathan James Barrett

Nplus1 Singer Capital Markets Limited, Research Division - Senior Media Research Analyst

* Paul David Richards

Dowgate Capital Stockbrokers Limited - Executive Director

* Sean Thapar

Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst

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Presentation

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [1]

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Good morning, everybody. Thank you very much for coming here. I -- your faces I know very well. You were all at Capital Markets Day, so there'll be a bit of repetition. I will try to minimize that and go fairly swiftly through so we have actually more time for Q&A.

We've got strong group revenue of 18%, with the underlying business growing at 10%. This is obviously well ahead of the market. Our adjusted operating profit up by 41%, global Data Products and Services continuing to drive growth, now 54% of group revenue. Obviously, we want to see that division grow as large as possible, but as we will signal coming up, we're not viewing now anymore sort of competition between Custom and Data Services. We want both of those sides to grow as much as possible, and we'll be -- I'll be explaining why.

In spite of this being the final year of our 5-year plan, and you might think that we'd be holding off a bit on investment, we've actually increased our investment this year in technology. These numbers are in spite of the fact that we've actually had significant investment in technology, panel and global reach, creating a platform for the next 4 years of growth that we will outline. We've had global expansion with growth of panels in Australia, India, Italy, Mexico, Poland and Spain and Taiwan, plus 2 bolt-on acquisitions in the U.K. and the U.S.A., much of this significant investment for the future, transforming our research services through integration with our syndicated data. Again, I'll be talking about what that means that we no longer see Custom Research as being separate from our syndicated data but coming increasingly integrated with it.

Our current trading is very positive. We remain confident of our expectations in the full year and delivering the 5-year organic growth plan. And indeed, we are setting out ambitious growth targets for the next years as well, for the next 5 years.

So taking you through the numbers in detail is Alex.

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Alexander George McIntosh, YouGov plc - CFO & Executive Director [2]

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Good morning, everybody. Just to run through some quick headline stats. It's been another strong half for us. We'll get into more detail in terms of what's driving that. But in terms of our revenue on a reported basis, up 18%; the adjusted operating profit number, up 41%, clearly a manifestation of our drive towards targeting higher-margin work that we've been focusing on in the first 5-year plan.

I'm going to take this opportunity just to add a little footnote. You'll have seen in our announcement we've just signaled that we are considering changing our definition of adjusted operating profit. We've had sort of a long-running conversation with investors and analysts around the treatment of amortization of internally generated technology and panel costs, the argument being it's fundamentally a cost of our business. And so whilst these numbers are presented on our historical treatment, when we get to the full year, we will be making a change there.

Balance sheet continues to be strong. A key point here is the group has no debt and a strong balance sheet, some minor points on receivables, down on creditor days, up a little bit just on managing working capital. The biggest change in our balance sheet is the contingent consideration that we're carrying. You'll have seen we've announced a number of acquisitions. Those acquisitions have all been small bolt-on acquisitions where we have structured relatively small upfront payments with performance-based earnouts. So we're currently carrying GBP 16 million of potential consideration we'll be paying out over the next few years.

Cash flow, you'll have noticed cash generation dragging slightly compared to operating profit. That's actually consistent with our half year. If you're familiar with our full year numbers, we're normally ahead. That's to do with the timing, where we are in the year. The subscription business that we have, we invoice a lot of the renewals around December and January, and obviously, by the time we get to our full year, that catches up.

Stephan mentioned investing. We are preparing the ground for the next 5-year plan. We've added a little bit in the half in terms of panel expense. We've spent more in the U.S. panel acquisition. We were doing a lot of midterm election work there. Second half, that will drop down a little bit and would be broadly in line with -- or slightly higher than it was last year. But technology, we are starting to add to the technology teams. Some of that's within the existing teams, and it's also within the teams that we've acquired through cleaning up the Crunch acquisition as well as Portent and InConversation, which have some key technology for us.

Other points to make, pleased that we've increased the dividend over last year. We do have a progressive dividend policy, and so expect to see that increasing in line with profit.

And sort of final point is we still are carrying a lot of cash. We are expecting to use some of that cash for contingent consideration, but clearly, we have begun to press the M&A button, which has been a sort of a long-standing question that we've had.

And a pickup by exception because overall, everything has been very strong. Stephan is going to reference a slide later on just on how we look at Data Services and custom, and I am going to pick out something specifically here, particularly 9%, but ultimately, on a reported basis, we're seeing strong revenue growth from Data Products and Data Services. That Data Services number is inflated by the acquisitions that we brought on. Galaxy acquisition is, for the most part, a Data Services-type business, which we are including in that number when we're looking at our underlying change, which is adjusting for the FX impact as well as how much contribution the acquisitions are making.

The number has come off a little bit compared to the historic numbers. What's driving that is as we've been cleaning up our custom business and really refining what custom is, we're starting to see a blurring in some of our departments between what was custom and what is Data Services. And so there's been a reallocation in our Nordic business of moving about GBP 1.6 million of revenue from what was historically cast as custom is now a Data Services offer. Part of that's been a little bit of restructuring. We've rebalanced the resource base there to deliver, but fundamentally, the Nordic -- what was custom business really looks like a Data Services deliverable. Now that's dampening down the growth rate, and that department has fundamentally been flat year-on-year, but it is the reason why we're seeing a big jump up in the reported.

Another point to make is just custom. We are at the tail end of the restructuring. We have really been focused on driving the Data Services and Data Products part of the business. And really, custom's been about improving margin, sort of taking you the number of 3% or 4%. In this market, that's a pretty respectable result. Going forward, we'd like to start seeing that number ticking up and really targeting top line growth within that department.

Just a quick few points on operating profit. As we've mentioned many times before, the focus on syndicated data continues to drive our operating profit growth. You can see in the Data Products line, 53% growth from 1 half to the next half. That really is about sort of achieving the operational leverage which we have been targeting. We are starting to see some of the smaller countries that we've been investing in Data Products contributing, and so that's helping pop up the margin a little bit within that department. Data Services is broadly flat. In terms of margin, we've come from 26% to 25%. That Nordic piece is dampening down that just a little bit. We'd like to see that ticking up just by a point or 2 in the second half of the year. And custom, you're seeing good growth in terms of operating profit contribution, and the margins are really starting to get pretty healthy there. That really is the -- some of the tail end of the restructuring work has happened. We're now starting to see a much more performing department there.

The U.K. and the U.S. continue to be our -- the biggest contributors in terms of revenue. You'll see the U.K., the year-on-year change is 37%. A big part of that is the SMG acquisition that we made, which is a U.K.-based company. So we're looking at sort of underlying change versus the core U.K. business growing by 16%. That's an incredible result we're very pleased with.

Just a couple of other sort of callouts, Mainland Europe, starting to really get to grips there. We've had a little bit of a portfolio effect in Europe, where we've had some underperformance in the past in Germany but has begun to turn around. And so that we're pleased with the progress we're making there.

On a reported basis, you'll see Middle East is down quite a lot. As I mentioned, the restructuring a big part of that. That work was taking about GBP 1 million of revenue out of the Middle East. So if you adjust for that, a decent performance in the region.

Asia Pac is a little bit of a black mark for us this year. 34% on a reported basis, driven a lot by the Galaxy acquisition, 4% on an underlying basis. We've had a change in management in the region, which has taken off a little bit of momentum. [Grant Saddi's] done a very good support of rectifying that, come up with a nice clean solution for us. And so the second half of the year was looking much better for us in the regions as we bed down a new management team there.

Operating profit. In terms of growth, sort of an absolute number is U.K. and U.S. continuing to contribute a good amount of our profit generation. I'll pull out the exceptions again. The shift in margin coming down a little bit in the U.K. is in part due to we're investing in a new team. Stephan will reference it later for public data. We're carrying the cost of that team. They're investing in sort of generating sort of new propositions for us. They've been selling very well, so that will come back again in the second half as we deliver those projects and they've been very successful for us in terms of sales. We've just not seen the revenue impacts yet as we deliver those projects. And we're carrying a little extra cost in the U.K. because we've refurbished our office to give us sort of a good solid base for the next few years in terms of absorbing more headcount in the U.K. without having to sort of move offices or, well, take additional office space.

In terms of everything else, quite pleased in being able to progress margins. The areas that we've been investing in over the last few years are all starting to sort of contribute more effectively. That says they've been gaining momentum around these Data Products subscriptions. Obviously, as you build momentum, the revenue starts to build, and getting the margins coming through, sort of combination of these things is increasing our margin by 3 points in the half. And we'd like to see that obviously continuing incrementally.

And with that, Stephan?

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [3]

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Thanks. This -- BrandIndex is continuing to be a very strong performer. We always say there's a long way to go, and there's still a long way to go. We've got 38 markets now covered. This obviously is going to be a fully global product eventually. We have a lot of customers for it, but still many, many more, we cover many more brands than we sell to at the moment. So a lot of headroom there. We've had growth in the period of 23%.

In Profiles, we are as well growing significantly. You see the revenue continuing to move up significantly, 66% growth over this time last year. It's now available in 19 markets, so the Profiles originally was a U.K. and U.S. product. We went to Germany with it, and that was what we called full Profiles. We now have a mini version, which contains a lot less data, but perhaps some of the most critical data is in there. And we've been able to spread that across more countries. And again, this will catch up with BrandIndex to eventually cover all major markets.

And as we are increasing the interoperability between the BrandIndex and Profiles, we call it Plan and Track very often when we go to the market with this, which is essentially signaling how it is or messaging that it is very much at the heart of what every marketer needs to do to plan and to track what they're doing. And this is the tool that together, Profiles and BrandIndex together, is being created into a single screen so that it will, at some point, be a single product.

Omnibus, a slightly complicated story here because the success of Omnibus means that we've had taken its operations to take over more and more from Custom Research. Omnibus is, in a sense, Custom Research because obviously, as you know, every question in it is for a separate client unlike syndicated data, which is, well, we create it, and then everybody buys a log-in, and they can build on top of it. Omnibus and Field and Tab is custom, but it is highly engineered. So the Omnibus goes out of the certain -- like an omnibus, goes out at a certain time each day, arrives the next morning, the data comes in a delivered prepackaged way to you. It's very engineered, which is why it's had high profit margins. It's very engineered, it's cost-effective, and yet it's high-quality because all of the quality is packed into the engineering.

That has been extended more and more to other bits of Custom Research that we have. So there was -- used to be you had Omnibus, which was just the defined services -- service. And then you had Custom Research doing a whole range of stuff, and that was the bit that we have started to rationalize. So when you hear, because Alex referred to it earlier, that the number has been changed in that last bullet point, revenue growth in the period includes GBP 1.6 million transferred from Custom Research and GBP 1.4 million due to acquisitions, the transfer from Custom Research is using this more efficient platform to do more and more for Custom Research and leaving Custom Research to focus more and more on the big, heavy, highly processed trackers, which we'll come to in a moment.

So Custom Research is -- has -- we're showing here a slide not by revenue but by operating profit margin. The intention, as you know, over these last 5 years has not been to increase Custom Research to the same degree but to make it more profitable. And here, you see that, that profitability has now reached the same level as the Field and Tab, as Omnibus. And that's extraordinary. This is an extraordinarily high profit number for Custom Research, for what is essentially, I won't say it's traditional because it's all built on our engineering, but it is a very high number. And that's because they are focusing now increasingly on heavy-duty, large-scale trackers that are repeated either monthly or quarterly or annually that are then often scaled to other countries. Obviously, our biggest clients are doing multiple tracking studies across multiple geographies, and that gives it the kind of leverage that we have in the rest of the business.

This is the underlying idea behind the switch to -- of the sort of tail -- the long tail of Custom Research to the more engineered Omnibus and Data Services team and means that in the future, we will be looking to -- and you'll see them into how we intend to account for that, we'll be moving to these 2 things: search, Custom Research and the syndicated products from Data Services, to be seen as very much part of a single system, all of which we're trying to grow in harmony.

In this slide, which Alex referred to earlier, we're looking at that, just signaling the change that we want in our reporting. Data Products and Data Services and Custom Research have been seen separately. We've been looking at Data Products and Data Services as something that had to go beyond 50%. We are now on 54%, so we've managed that extremely well. Custom Research, we've been working on getting the margin up. And now we want to say, actually, we see it in future as syndicated data and as Data Services. That is to say everything that is data that we own and that we've made and we've designed, which is BrandIndex, Profiles and other kinds of trackers that we're adding to that, that are designed by us, and then we just sell log-ins to them essentially. That's on one side. And then everything we do that is custom but built on top of this will be called Data Services, and we will treat those as the 2 different divisions as it were. It's a more efficient way of thinking about this. And what it does is it really structures the -- this alignment that we've been talking about between custom and syndicated data so that more and more the custom is built on top of the engineering. And ultimately, as we create this thing we call the screen, which is a single access point to all YouGov services and data, it emphasizes that actually, this is a systematic approach to research where you do everything on this one screen from seeing how things are moving, how things are changing, analyzing the markets that you're in and monitoring change to everything that you want to do to investigate that further, to do investigations, whether that's recontact studies or it is, in fact, detailed product custom trackers.

So that's just signaling how we want to look at that in the future, which is part of simplifying and making our system -- simplifying the system, simplifying our message and getting that more and more engineered.

Our strategy for the next 5 years is the best data and the best tools. That is what we can easily justify in terms of the quality of our data, which has been attested to whether it is the quality of the sample. Pew, as you noted, that big test of various samples of 11 different samples and found the YouGov samples head and shoulders above the others in terms of representativeness, which is, of course, the quality of the sample. Also, the best data in terms of it is by far the largest body of connected panel data. It is the most detailed, it is the most frequently updated, so there's really no question that we have the best data, and we will increase our investment in that and make it more and more obvious in ways that are demonstrated in the moment, that we have the most complete, the most updated, the most detailed and the most representative, that is to say, accurate data in the market and the best tools, the best tools being analytical tools like Crunch, which are unsurpassed in the speed and efficiency with which you can do complex things with our data; and tools that add on to that, like YouGov Direct, which I'll talk about in a moment, and new tools that are coming along with how you can activate your data.

Our current and next 5-year growth plans. We've -- as you know, we come to the end of the existing one. We got half a year left of that. We had a very specific target. And we now have a new growth plan, which we've unveiled, which is overlapping with this one -- it was very important to us that we don't see these as 2 separate, as well as this overlapping year. It's very easy to have tried to hit a target, especially if you're incentivized to a big target, to do lots of things in that last couple of years to make sure you get that target rather than necessarily thinking of the future. It's the exact opposite of what we've done. We have invested heavily in this last year. As Alex has already described, we've invested in panel, we've invested in technology and so forth to make absolutely sure that we have a platform for the next 4 years of what we do see as a 5-year plan.

In the first 5-year plan, it was all about the Data Products becoming more and more -- both Data Products and Services becoming more and more the key drivers of the business, so Omnibus, BrandIndex, Profiles, and focusing on the U.S. market as the biggest growth. And of course, all of those things happened as we wanted that to happen. In the new 5-year plan, it's about all of those things as well but in a larger context. So you got Crunch. You got the Cube growing. You got YouGov Direct, which is a new way of doing at the simplest level of doing self-service custom research, but it is also going to be, I think, a new way of breaking the barriers often existent between research and activation, research and marketing.

And although we're still always going to look at this from a U.S. perspective for the next 5 years because that is undoubtedly the biggest driver of our growth and will be throughout this next period, it'll be from a -- more of a global perspective. That is to say, first and foremost, our American customers are the most likely to be buying fully global data. And so satisfying their needs is a big part of what's driving which countries we go to and how we do that. And of course, as Alex said, with centers of excellence around being able to service all these countries, we want to, of course, build the local businesses there as well.

We have 3 strategic pillars. We went through this in the Capital Markets Day, and so I'll be fairly quick about it. Integration, which is integrating custom research and client services with our data and tools so that we see it as one systematic approach. And that means as well a technological integration so that you can access all the tools and all the recontact stuff and build your own trackers and everything else we can think of from one single platform, from one single screen.

Public data, we haven't talked about that. I'll show you -- you'll see what I mean by that in the next slide. Public data is all the stuff that you're well aware of, which is our polling, which gets our name out there, the brand is very important to our traction in the -- in our markets. It's always good when someone's heard of you. Even if they think of you as a political pollster first of all, it's still a way to get talking to clients and to get meetings and so on. It's very important for our panel. But most importantly, it's going to be important for showing what we've got in terms of other forms of data, as I will show you in a moment. And activation is that step of going beyond looking, beyond understanding and saying, "Actually, let's make this data run our campaign for us." That's what activation means, and we'll talk about that.

So public data. If you now go to Google and you look up most popular brands and some other variations, you'll get a little piece of YouGov on top. That's -- these are all sorts of screengrabs from Google where they're picking up on ratings now, and YouGov Ratings will come up. And we're doing obviously the best that we can in terms of search engine optimization. Some of these come from Google itself, though. Google itself is now actively using YouGov data in its reporting search. If you look up most popular conservative politicians -- and I hope as time goes on, the more variations you have in those words, you're still going to come back to something like this. You see that obviously, the conservatives is also true for Labour and so on. I don't know today whether if you said the most popular sports stars or movie stars or whatever, but they could all come up with that.

The last one is we've got most -- the ideal height or most ideal, which isn't really the most perfect diction. The ideal height of a woman, could have been be the ideal height of a man or the perfect height for a person or whatever. If you look up any of those things, you get not only our data, but that's actually a curated -- it's what they call -- a curated piece of Google data where they have gone and curated -- so on different screens, you can see charts appear on your screen. We -- when we're talking about being the encyclopedia of opinion, that's essentially what we're aiming at, that the more things you can think of that YouGov could have an answer for, when should you get married, we actually have data on that where we link the ages that our panel got married at and the level of happiness, just so you can see, is -- does that -- we want you to be able to look at all of our data in a way that is useful to the public.

Movie reviews, we're not at that point of recent movies, but all of our -- all movies now have the YouGov Ratings because they -- sorry, it's not all. In the U.K., in the U.S., we have -- we have Opigram, which rates movies. And that will be become part of Ratings as well.

It's important for us that our data is visible to the public for 2 reasons. First of all, the whole panel satisfaction stuff, join the panel and take part in something that's really useful and visible and fun, not just endless market research surveys. Even though this is, of course, ultimately market research, it's done in a much more engaging and gamified way. But also, because of course, if people start looking up things on Google and get YouGov data, then it becomes increasingly visible as well to people who don't know us or don't think of us as a market research company. I think if everybody else is getting their data from us, then companies will want to do that, too. So this is really important to us, and we are investing strongly in our public data.

YouGov Direct. We've had 2 trials now. The last trial was with 8,500 panelists on our new app, which is -- also, that trial involved some actual clients. I think 6 clients took part with real apps and real click-throughs to real actions at the end. For example, there was one movie trailer that was tested, and at the end of the movie trailer, you were able to go through and click and actually order tickets for that. 6% of our panel that took that survey actually went on to buy tickets at the end of that for that movie. And this is a fantastic way for companies to test the validity or the value of their advertising. If you like a mini A/B test where they can see, not only do people say they like something they've seen, but does it make them act? And that is what I mean when I say breaking down the barriers between research -- pure research and marketing.

And we can do this because the app uses a blockchain technology, which makes it visible and indelible the record of the permission of that data to do that every single time. That is one of our innovations that we -- was inspired for GDPR. We saw GDPR not as a barrier but as an opportunity to do something new. But if you were really going to embrace the idea of privacy, then you could, in fact, do new things in marketing and in data and in research that have never been done before. You could do things that wouldn't be ethical in a normal framework, becomes ethical at YouGov because people are doing it in -- they know what they're doing, they're doing it deliberately, they want this to happen, and there is a receipt of that agreement for every single interaction in the blockchain. And so we think that's a potentially revolutionary and radical solution and have a long way to go with that. And we will be -- within this year, that is to say sometime in June or July, we will be making that open to the first clients.

The YouGov platform's integration, this is everything together, brought together on a universal platform. The use of a single GUI, a single dashboard driven by Crunch that allows you to not only see that -- all the data that we have but then do your own self-service recontact studies on top using a new tool that we -- that is in use at the moment called Collaborate, where people can come on and write their own surveys, and researchers can work with them in a very light-touch way to improve their surveys and then activate them on the screen. The activation of that data isn't yet done, but that's where we're going then.

We have created, and Alex, I think, referenced it earlier, our centers of excellence, that is -- allows us to globalize more efficiently. We have already a significant -- 2 very significant centers of excellence: one in Romania, one in India, in Mumbai and Bucharest. And a lot of our data processing happens there. More and more our reports are being able to be written there, and our slides presented are created there. And we are now building one in Toronto as well and intend to have the ability to run surveys and get analysis and get help 24/7 across the globe. Initially, that will be -- the focus will be operations itself, but we will be using that model for other areas as well, finance, technology as well as more advanced research. It enables us not only to give 24/7 coverage but to service countries where we don't have to have an office locally to do that, but we can nevertheless give them full attention through our centers of excellence.

We've been expanding into new markets and new sectors. Just to highlight 2 recent strategic acquisitions, Portent, which is a new way of using social signal, and we're calling it Signal, YouGov Signal as a service. It as a product that was made for the movie industry, based in Los Angeles and has been doing well there, has most of the major studios as customers of -- is it, I don't know, most of the major studios. I think 4 major studios, I don't know if that's most, are our clients. And it uses social signal, that is to say scraping the Web for not only social media but other kinds of data scraping to monitor change in what people are saying about things. It allows us to have data on pretty much everything that's going on whether or not we've asked about it.

And we've also invested in the acquisition of InConversation, Inconvo, which is a chatbot which allows us to get data from people in a totally different setting in their Facebook, inside Facebook Messenger for example, has very low cost of acquisition of panelists. Of course, panelists are not committed in the same way as they are on our normal panel, but some of them can be brought across. And in any case, we need to be able to talk to young people who are not interested in joining panels, and that's what our data brought -- Inconvo does.

Our new long-term targets. We've referenced them, I really want to stress, and this is very important, there's a difference between forecasts, budget forecasts, and our incentive targets, the targets we're using for our incentives. So our ambition for growth is undiminished. We want to be the world's leading supplier of proprietary panel data used by every public-facing company and organization, used by hundreds of millions of people as a daily public resource, that's the public data, and be the world's largest -- have the most -- largest and most engaged research panel because in the end, these panels that you're engaged with us, that are on our technological platforms give more data, better-quality data, faster data and more activatable data than any other methodology that's out there.

But these long-term targets I was referencing, they are not, as I say, forecasts, but the senior management and indeed several layers of YouGov managers will be incentivized to a target that is even more ambitious than what we have for the first 5-year plan. So we are expecting to -- we are hoping to -- we are going to try, to double our group revenue, to double the adjusted margin. And that means quadrupling the earnings per share over the next 4 years by '23. That's what we want to achieve.

The outlook. Strong pipeline of sales and opportunities for our syndicated Data Products, opportunities for growth in Custom Research, in line with our core connected data offering. There are lots of new companies we can approach with this and start to take over as their major market research supplier. The second half trading continues very positively, continued investment in our technology platforms and geographic expansion throughout this year. So our growth in profits is in spite of continuing to invest significantly. Significant opportunities for us in the digital advertising ecosystem, which is YouGov Direct in particular and our audience data. The board remains confident of expectations for the full year, on track to deliver our 5-year organic growth plans that you're all well aware of. And we have begun our next 5-year plan. Thanks.

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Questions and Answers

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [1]

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Any questions?

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Fiona Catherine Orford-Williams, Edison Investment Research Limited - Director & Sector Head Media [2]

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Fiona Orford-Williams from Edison. Just on the universal platform, is this an aspiration? Or is this something that's already in situ? And if it's not already in situ, what do you need to do to achieve it? Do you have any -- we didn't actually talk at all, I think, well, very much about clients. You've mentioned before the concept of chartered clients, and that should be the first half. Has there been more? And has there been any other underlying notable changes in the client base?

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [3]

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So I'll answer the first, and I'll leave Alex to the second. All the pieces that I've described exist. None of this is fancy ideas and dreamt up that we have yet to do. All of the pieces exist. The work is in integrating it into more and more efficient platforms. So if you want to do any of the things that we envisage you doing in the future, you can do them now. So if you want to look at our research and look at our BrandIndex for example and see that there's been a drop in, I don't know, a supermarket's customer satisfaction ratings, that company can then say to us, "We want to know more about that and say, 'Who are the people that are telling us they're not enjoying our fish count or whatever it is?'" Or they actually wouldn't get that from that. They would have to do this research. And then we could talk to the same people who actually told us they used to like whatever it is, whatever supermarket, and then now they don't. And we could construct that, right, and we could run that and give them the data. We want that entire process to be able to be done self-service from the screen. Now how far are we from that? Well, we have the data, we have Incon -- we have Collaborate, which is a tool for writing your own surveys. That is -- we have obviously a method for getting the sample, but that's not yet attached to Collaborate. You can't create your own sample from that yet. When that attaches, you will be able to then create your own surveys and complex samples. I don't just mean, "I want a general -- gen pop. I mean you'll be able to design your sample directly from our detailed database, which is Profiles, which already exists, right? So all of these things already exist. It is a matter of making them into a single platform. There are lots of other things, which are aspirational on top of that, which we have started with. For example, AI and other things like that. MRP is a form -- is a type of machine learning, so we have again even started with that. And that is -- has been added to the whole Cube for certain sections so that some people are able to look at some of our data through that lens. And so that really means that all of the things I've described exist, and it's a question of putting it together. Those dashboards are happening. We've -- the Ratings dashboard is -- not dashboard, sorry, the Ratings website where you can look up most popular politicians, has -- it's the start of that, you search for whatever it is, a brand, a person. Up comes their Ratings page. A lot of the -- you have a quick view of some of the data -- interesting data about that. It's -- sitting behind that is the Cube. So all of these pieces, including the Ratings part, are all part of one system. So that is happening, and it won't be a big bang. It won't be suddenly it's there. Here is your Bloomberg screen that I always fantasized about as it were. It will be more and more things starting to connect.

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Alexander George McIntosh, YouGov plc - CFO & Executive Director [4]

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I'll just pick up the clients bit, which I'll just pick up on a trend that we're seeing and then sort of flag some of the work that's happening behind the scenes. We're starting to, particularly within the client service teams in the U.S., see when they're getting renewals for running X on Profiles, clients committing to ever longer contracts, so the longest one that we've signed this year was a 5-year commitment to the product. So gives us great confidence that the people who we're selling into really do see the power of the data and the power of how it sort of drives the business going forward. Just coming back to the slide that Stephan talked through, where we had our 3 pillars becoming product and services, the biggest shift for us, and we talked a lot about technology, the biggest shift for us going into the next growth plan is becoming much more client centric and, as an organization, really growing up in terms of our sales organization, becoming much more systematic in the way that we approach sales globally. So we have very high-performing teams in different countries. But running that really as a -- there's a YouGov way that we sell, and then also on the services side, really looking at beginning to look at key accounts globally, who are the big companies that you want to be working with everywhere so that we can become their #1 provider of services. That's the biggest gap between us and our big competitors, is they'll have accounts that they're doing everything for. We're not doing everything for big multinational yet, and part of our growth plan is to start targeting those. As we've been developing the technology and developing global capability, we want to be becoming a much bigger partner for some key clients.

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Fiona Catherine Orford-Williams, Edison Investment Research Limited - Director & Sector Head Media [5]

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Does that include putting in an additional level of people wherein part of the reason behind that are the new services?

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Alexander George McIntosh, YouGov plc - CFO & Executive Director [6]

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It's a work in progress. It may mean a slight change to the senior management team in terms of having much more sort of geographic coverage on a regional basis on key accounts. We may see sort of a horizontal line of global sort of new sales management, which currently we don't have a single person responsible for new sales. So it's part of our senior planning -- senior team's planning into the next plan. That work is happening behind the scenes now.

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Paul David Richards, Dowgate Capital Stockbrokers Limited - Executive Director [7]

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Paul Richards from Dowgate. Following on from Fiona's question, I mean, is there a customer you have at the moment that you think is using all your existing tools and products as they -- as you intend them to be using, and you can use that as a template to roll out to others?

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [8]

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We have some customers that are very good users and very sophisticated users of our work. Unfortunately, we can't give case studies of that because there's a little creativity in that, that necessarily people don't want to have in presentations, in public presentations. But yes, we do have. But I think the reverse is really the opportunity. That is to say, the fact that most people don't do that, the vast majority of our clients are using a piece of our data. We have very many BrandIndex clients. Only some of them would do add-on research. Same with lots and lots of people using us for Field and Tab, who are not using the underlying Profiles data. To some degree, that will become less possible for them because the underlying Profiles data will be in the data they get, and there'll be a charge for it, it'll be much higher quality, much more valuable to them. But that is -- yes, that is essentially why we want to build the screen, to make it so obvious that you do the next thing, that you're getting your data inside a system that has all the tools attached to it that you're not using. So if you were looking at BrandIndex scores and you're seeing a movement, there's something right there that says investigate, and you click on it, and it shows you how. So that's very much part of what we're trying to do. We're trying to do a lot -- as much of this as possible by technology -- by design. And so that the -- all of these tools do feel like a system, and you're buying into the system at some level. New subscriptions will be some sort of subscription to the system if only because you -- even when you get -- you're getting your Omnibus pieces back, they're going to come back in Crunch, in a website, in a vault, if you like, that has a whole set of menu which is grayed out or whatever that you're not using. So that -- it's about getting people to do that for themselves. I mean, at the moment, we have it in a way that is very heavy with use of our experts to do it for them, and we have several clients, yes, that do combine these things. But it requires a lot of custom research to design these things. We want this to be as automated as possible.

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Paul David Richards, Dowgate Capital Stockbrokers Limited - Executive Director [9]

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And then some questions on the 5-year plan. First of all, congratulations on achieving -- well, for nearly achieving the first one. The first one is being almost entirely organic. Do see a greater role of -- role for acquisitions in the second plan? And then the change in accounting treatment to include amortization and share-based payments, can you give us what the 2016 base will be?

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [10]

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I'll obviously refer you to Alex for most of that, but just beforehand, on acquisitions, we do -- we have had a series of small acquisitions, which have been very successful for us. I mean, they've -- I think the last 4 or 5 have all been very obviously working well for us, I mean, including the last 2, which are already used -- Inconvo's already being used to get panel for the Australian elections, and Portent is already creating bridges with some customers based in Los Angeles and so forth. So we will continue to look for those acquisitions, as Alex intimated -- I think it was in this conversation, maybe in a separate one. We don't have plans for a major transformative acquisition. We have plans for lots of things that will add to a bit of footprint or a bit of technology or a bit of market know-how or whatever. We've -- the model you've seen in the last few years of these acquisitions really being of value to our 5-year plan, our strategic plan, I should say, is something that we want to continue.

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Alexander George McIntosh, YouGov plc - CFO & Executive Director [11]

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And just on the adjusted operating question, we look at this year's full year number, it's in all likelihood going to be a one-off 6% step down in our reported margin in that we're expecting around GBP 7 million of just over-amortization. Going forward, we will be sort of intimating -- continuing to focus on technology spend, that number will probably rise in line with revenue. So I think we should expect it to be a step down and then sort of continuation of the trend.

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Paul David Richards, Dowgate Capital Stockbrokers Limited - Executive Director [12]

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And the share-based payment is only about 3p last year, I think.

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Alexander George McIntosh, YouGov plc - CFO & Executive Director [13]

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Yes. We've -- this is more tidying up this small sort of irregularity. We've always been including it in our adjusted operating profits, sort of taking that charge, and we've been adjusting it out of the profit before tax number. So currently, yes, about 3p. Going forward, the new plan is yet to be completely nailed down, so we'll be updating on what that number looks like going forward.

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [14]

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Here also.

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Sean Thapar, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [15]

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Sean Thapar from Berenberg. Just to pick up on a kind of similar trend, with the creation of the dashboard, just from the client perspective, does that combination of capability slightly upgrade YouGov in terms of their view of you as a provider? Do you suddenly start to access wider elements of market research they're looking to do? And I guess just a kind of slight side point on that to do with the sales, are you really kind of incentivizing the sales guys now to start conversion between what you've done in syndicated research and growing their kind of footprint out there into much deeper kind of Data Services relationships?

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [16]

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Yes. On the first, the -- and I think they're connected really. On the first, we are definitely seen by most people as -- by most of our noncustomers as pollsters. And that's been the challenge for us, is to use -- the fact that we're seen at all is great. Visibility is very important, and the challenge of getting them to see them as -- us as people who are sophisticated in our -- in the range and the ability to use, to actually -- what's the word? Well, ultimately you activate the data, is actually leading-edge. For a lot of people, they still think that somehow traditional, old-style research is the sophisticated sort of thing and that data -- that online is a sort of quick-and-dirty thing. That was the sort of thing of the last decade, but that still hangs over the industry to some extent. And we are the leading edge in that -- the leading edge in analytics and customization through technology and so on. So yes, that is a big challenge for us. The second part, which is to remind me what...

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Sean Thapar, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [17]

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Just how you're kind of approaching it from a sales perspective in converting...

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [18]

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Yes, yes, yes. Absolutely. And well, Alex just mentioned it. We are, in fact, professionalizing our sales approach. The first part of -- the first 5-year plan actually was all about just getting straight our product and what matters and what doesn't matter and so on, and we will have been strengthening our sales forces and all of that. But there's a long way to go to that. We are now working on a very disciplined sales matrix, which combines sales and service and upselling, cross-selling and key account management in a way that we haven't done before. So because we've simplified and systematized our offer, it's also possible for us then to simplify and systematize our sales and service matrix to be more effective at those things. The clearest step change, the easiest thing we can do is to cross-sell. We've got so many clients who are doing one thing only, and they can do several things. Alex has been hard working on this. You want to...

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Alexander George McIntosh, YouGov plc - CFO & Executive Director [19]

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Yes. I think the biggest opportunity, which we've repeated a couple of times in these conversations is that part of our -- sort of our focus for the last few years really has been about driving sales within those 2 verticals, being Data Products and Data Services, where we basically have been holding a custom study, so broadening out essentially the concept of account management so that we're incentivizing people to sell across the piece, the services, is easier because we've stripped out a lot of the things that were noncore in that custom product. So the -- if we tried to do this 3 or 4 years ago, it would have been too confusing, and we would have been offering far too many things to clients. So really, it's the land, things that we knew would be our sort of key differentiators. Sort of going forward, a sort of combined team means you've got far more opportunity to be targeting sort of that -- the traditional custom business -- budgets rather, that customers have been spending, which we just haven't had active salespeople in the market for that.

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Sean Thapar, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [20]

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And then one quick kind of follow-up is, as you kind of now scale the business out, just competitively, is there anything that you're kind of looking at that could throw you off-course? What's the kind of risk or danger in your mind around competition?

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [21]

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Well, obviously, when you're successful and visibly successful, you start getting companies that are mimicking what we're doing. We're aware that that's a potential risk, that people offer a cheaper, lower-quality version of what we do. And that has been happening. I mean, the -- certainly, if you're not prepared to pay the full price that we charge for the highest quality, you may go for a cheaper competitor. That's always the case. We lead on innovation and on the best data and best tools that we are the -- that what we have is a long way ahead of others. We can reference our predictive capability for that. Nobody else has our record of accuracy since the 2015 election, which we all remember where pollsters all got it wrong. We used that as an opportunity to upgrade everything that we were doing and, of course, got to a place in 2017 when everybody else thought there was going to be a landslide victory for Theresa May. We predicted essentially all the mess that we've been having since then by saying it will be a hung parliament. We do say -- we do talk about that in presentations to say it's one thing when you're looking at market research to treat it all as if -- well, whatever the numbers come through are the same from company to company. We say, well, they're not. They can be inaccurate, and you need to know that they're accurate. And we stick our neck on the block every time we possibly can to prove that we have accurate numbers. And whatever accuracy you see in the public data is also in the market -- in the consumer data. So that is how we sell ourselves. We say, look, we have clearly all of the best data. You can play with the tools, the best tools. There will be others that have a cheaper version of what we do, a cutdown version of what we do. That's where we see problems arising potentially, but if we laid our arse all on that, then I think we'll be victorious there. Yes?

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Jessica Pok, Peel Hunt LLP, Research Division - Analyst [22]

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Jessica Pok from Peel Hunt. Three questions, please. This mic is very loud. So the screen seems like a very exciting development. I know you've got the rating piece, which is you've developed a lot of, but actually in terms of delivery, are we talking about to get Collaborate and all the data feeding into Collaborate a couple of months or actually we're getting deep into FY '20? Second question is about the curated data for Google. It looks to me like you're using a lot of the Ratings data, but actually there seems to be other data in use there. Are you allowing Google access to the whole of your database? Or I mean, who's doing the curation? And are they paying for it? Or how does a partnership work? And just the final question, on the Asia business. Your margin's a bit low. Now you've had some management changes there and et cetera. But I mean, what is the plan for growth in that region? I know historically, Data Services tended to be a bit more popular because of the -- kind of a lower price point, but with things like mini Profiles, et cetera, I mean, are you expecting to push data products into that region?

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [23]

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Okay. The first of those, I did touch on that there won't be a big reveal, a big bang in 2 months or 6 months or a year. What it will be is, bit by bit, you'll see something upgraded. So Ratings was quietly added, and it did its job. I mean, there's -- to move on to the second one, the second part. Now Google just picks it up, and the more visible we make it, the better that can be. We have had one client for Ratings, one client that uses Ratings in its algorithm, a public media site, which I won't mention but that actually uses the Ratings data inside it and pays for it for that use. In the case of Google, though, what you've been looking at there, no, that's just public. They haven't done that, and with any discussion from us, they have no special access to it. We want exactly that to happen. In other words, unlike some other people who might say, "Oh, we don't want Google using our content to be their content," that's the opposite for us. We're extremely happy for anybody to use our public data content. We want that to be as ubiquitous as possible. We don't make money, we don't want to make money for -- the public data is essentially the public value from all the data that we have. So BrandIndex numbers are in the public data. They're the bits that marketers will be interested in, but it would never be enough to do their job, right? And the things that they need to do their job will be of no interest to the public. For example, if you know that a particular brand is popular to this number, that's interesting. To know exactly who -- what the audience is like, what the people are that like this brand, what media they use when they want to buy cars or whatever, that's of no possible interest to the general public. So we want the same data to be valuable to the public for what it wants as for the -- for customers to be valued for what they want. So anyone picking up that data, we're extremely happy for them to do that. The third one, Asia Pacific, I'll hand over to Alex.

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Alexander George McIntosh, YouGov plc - CFO & Executive Director [24]

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Yes. There's -- Data Services is the piece that's come off, and it's obviously the thing that impacts you fastest because of the superfast turnaround. So part of the new manager -- new regional manager coming in has been about sort of solidifying that, getting that back on track. Data Products continues to be a strong selling point, so we're going to start seeing the impact of that coming through. Key things that we're focusing on, one is Australia. We think there's a lot more that could be done in Australia, and sort of part of our investment is in ramping up the panel there. And then an additional piece is also sports. So we've been layering in more sports-related questions into -- we refer to -- as Steve called them, sort of mini Profiles that -- and mini Cube where we've got consistent data. Clearly, the sports audience market is massive in Asia, and the number of brands that are interested in that data is fairly significant. So we're also starting to see off of the back of the SMG acquisition, a lot more interest in being able to basically take existing data, tweak it slightly to add these sports data overlays, which are then opening up opportunities.

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [25]

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Here.

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Johnathan James Barrett, Nplus1 Singer Capital Markets Limited, Research Division - Senior Media Research Analyst [26]

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It's Johnathan Barrett from Singers. I've got a few questions. Just turning to the custom business at the moment, and you're talking about the growth rate picking up, you flagged the margin, which is like extraordinarily high from some perspectives. Can you just talk about where that's got to in terms of the portion of genuine one-off work because obviously, some of it is recurring in nature? So if you could just talk about how much of that is one-off, where you expect that to decline to as a proportion as that business grows and how you feel about the margin evolution from there, bearing in mind you're already at 26%.

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [27]

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So that -- Alex talked about the proportion, but just before that, we're -- definitely the one-off only serves one purpose for us, which is the client needs to be one that we think we can convert to become a full YouGov continuous client, a subscription client. We're not going to pursue any of that kind of work. Now if it comes to us and somebody wants to use our data for it and we've got someone to do it, that's great and that's fine. But there is no going out to look for those kinds of jobs. There's no -- they don't have the long-term value for us. That is a really key part of making that custom research thing work because one of the reasons traditional custom research has always been so difficult is the researcher is going out to sell something then that takes a while, then they suddenly -- they go to fulfill it. Then when they finish it, they start looking for the next. I mean, obviously, they can overlap a bit, but its attention is very inefficient. And so you're quite right to point out to that. How much of it...

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Alexander George McIntosh, YouGov plc - CFO & Executive Director [28]

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It's actually a slightly difficult question to answer in that you've got various types of repeated work, so you've got people who are committing to monthly, you've then got people who are doing quarterly trackers, and we do get a lot of people who do some fairly significant annual trackers, of which our delivery is very strong, we expect to sort of renew those. And we have some also that are linked to election cycles, where they've committed to -- when the next election happens, we're going to be doing more work for you. So it's probably broadly about 1/3. How much of it is coming as one-off is another slightly difficult question because a lot of the tracking work then also drives more one-off work because you'll have something interesting coming out of the data, which will then mean somebody's asking us to do another project, which isn't competitive. Sort of saying, "Can you run this type of research for us?" As we transition, we'll start probably changing the way that we look at and report sort of KPIs around our custom business, and we're really focusing on exactly what that means and internally having a consistent set of definition as to what constitutes sort of tracking work because of that sort of -- the difference in the sort of time lines with people who are repeating.

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [29]

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And I mean, that whole bit about professionalization of the sales team and as well using digital sales and self-service as much as possible means that we can focus on winning over subscription clients as our outbound sales activity in a very strong way and rely on, "You come to us and you use self-service or whatever," if you want to fulfill something that's a one-off much more efficiently that way.

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Alexander George McIntosh, YouGov plc - CFO & Executive Director [30]

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Yes.

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Johnathan James Barrett, Nplus1 Singer Capital Markets Limited, Research Division - Senior Media Research Analyst [31]

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Is much of your Data Services business one-off? Or is -- I mean, is it genuinely one-off? Is much of it genuinely one-off? Or is it largely just everything is linked to...

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [32]

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It's very hard to -- well, if you...

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Alexander George McIntosh, YouGov plc - CFO & Executive Director [33]

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Yes. So well, we're going to give you sort of weak answers, which is a little bit disappointing. So there are 2 main components. Omnibus, which is a rate card-driven sort of business model, you're buying questions on something that goes out -- in the U.K. goes out twice a day. You capture sort of price efficiency because we're doing the same type of activity every day. We will get lots of that, which is one-off, and we'll have clients that spend GBP 1,200 for this once a year and may never come back. You also have other clients that -- let's take a PR agency for example. In a PR agency, essentially you have a distributed sales force. You have account managers, some of which may have another competitor that they prefer working with. You may have a small group of them that really like the service that we're offering. They know exactly what they're going to get. And so before they sort of call us and say they've got a particular project, they know roughly what it's going to cost and they know how long it's going to turn around. So they're doing projects when their clients have worked. So how much of that is, okay, it's all technically one-off as an Omnibus sort of offer, but you've got a lot of people who are repeat customers who are coming all the time because the customer service is fantastic. The other component is Field and Tab, which is -- and this is where the lines between custom and data services have been blurring. That's where clients are coming to us, and they pretty know exactly what they want. They've designed their own questionnaire. They may want a little bit of help with it, but there's not a lot of sort of work that we have to do on that side. And they've got a clear idea of who they want to target for -- I gave you an example for that. And so we're really providing a service, and we're running that for them. A big chunk of that is tracking work because it's regular work that a client needs to do, which they're then sort of handing over to us. But the sort of the bulk of Data Services is that sort in the form of Omnibus.

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Johnathan James Barrett, Nplus1 Singer Capital Markets Limited, Research Division - Senior Media Research Analyst [34]

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That sort of stuff is going to become part of the self-serve effectively over time.

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [35]

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Yes. I mean, self-serve is going to be a sliding scale because it's Collaborate, which allows you to talk to our researchers or at least talk to them online as it were. So they'll be straight for self-service where you don't talk to us at all, but you can also bring in some degree of service as you need to.

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Johnathan James Barrett, Nplus1 Singer Capital Markets Limited, Research Division - Senior Media Research Analyst [36]

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As you need to, okay. That's really helpful. And then just one small question, just on the contract that you've mentioned, one contract up to 5 years. What -- just can you give us some sort of profile on what the average contract size is? Is it at 50% in 1 year and 25% every 2 years? Or...

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Alexander George McIntosh, YouGov plc - CFO & Executive Director [37]

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It's sort of hard. Obviously, it's a long tail on the things that go out 3, 4 and 5 years. The bulk of it is probably averaging between 1 and 2 years. So I'd say probably these are very, very rough numbers, but 1/2 of it is probably within sort of 1.5 years because you've got people who are kind of taking sort of up to 2 years, and then 3 years is if we sell a multiyear subscription is the most common. And there's only a handful that are 4 and 5 years out. So...

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [38]

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Thank you.

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Alexander George McIntosh, YouGov plc - CFO & Executive Director [39]

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Yes, thank you, everybody.

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Stephan Shakespeare, YouGov plc - Co-Founder, CEO & Executive Director [40]

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Thank you, guys.