YouGov Regulatory News (YOU)

 15 October 2012

YouGov plc

Preliminary results for the Year ended 31 July 2012

Strategy underpins maiden dividend

 Operational Highlights

·; YouGov continues to increase market share with strong growth in its major markets and in data products and services

·; Like-for-like revenue increased by 9%2

·; Maiden dividend of 0.5p per share to be paid

·; US increased revenues by 21% to £19.2m (8% organic growth rate); UK by 15%

·; BrandIndex global revenue increased by 39% to £4.4m

·; Good progress made in turning around the German business; profit doubled to £0.6m on revenue of £9.4m (2011: £11.3m)

·; Middle East regionally generated business grew by 19% partly offsetting the £2m decline from the expected ending of the long-term contract in Iraq

·; Nordic revenue up 6% - ahead of market

·; New French operation started well: panel has already reached 75,000

·; Social Media Analysis (SoMA) product launched

·; Strong balance sheet with net cash balances of £7.2m (2011: £9.4m) after making £2.5m of earn-out payments for previous acquisitions

·; Current trading in line with the Board's expectations

1. Adjusted operating profit is defined as group operating profit before amortisation of intangibles, impairment charge and exceptional items; In the year to 31 July 2012, amortisation of intangibles was £4.4m (2011: £3.8m) and exceptional costs were £0.5m (2011: £1.1m). Adjusted profit before tax and earnings per share are calculated based on the adjusted operating profit.

2. Like-for-like revenue growth excludes Iraq contract, US business acquired in April 2011 and German businesses closed or disposed of in 2010/11.

Commenting on the results, Stephan Shakespeare, Chief Executive, said:

"I am pleased to report that we have achieved the objectives we set at the beginning of the year. We have continued to develop and invest in our growing portfolio of data products and services and increase revenue from these. This has helped to drive the momentum in our custom and data businesses, particularly in the US and UK. The focus on profitability under the new management in Germany is delivering planned margin improvements. The launch of the French business has gone well and regionally generated business is growing strongly in the Middle East offsetting the expected end to the large historic contract in Iraq.

Innovation remains a key differentiator and the initial customer feedback from recent launches has been very encouraging. YouGov is well placed to continue to outperform the research market both in terms of sales growth and our reputation for new product development: this, combined with our strong balance sheet, underpins our continued investment in the business and the decision to commence the payment of a dividend. Current trading is in line with the Board's expectations although the macro-economic environment especially in Europe remains uncertain"`

Enquiries:

Chairman's Statement

Introduction

In the year ended 31 July 2012, YouGov has performed in line with the Board's expectations and we have continued to invest to develop our business in accordance with the plans we set out at the beginning of the year. Given the continued success of our strategy we are pleased to propose the payment of a maiden dividend which marks a significant milestone in YouGov's corporate history. 

Results

The Group's revenue this year of £58.1m was 4% higher than the prior year and 9% higher on a like-for-like basis. While our UK, US and Nordic operations all grew well ahead of the market this was partly offset by the effect of the anticipated completion of the long-term Iraq contract and a deliberate focussing of our German business on winning higher margin work rather than just on sales growth. 

The Group's adjusted operating profit of £5.6m increased by £0.3m compared to the year ended 31 July 2011. We believe that this outcome is a creditable achievement as it incorporates the continued investment in the development of new products and expansion into new markets as well as the ending of our long term contract in Iraq. This performance should also be seen in the context of the continuing economic stagnation in Europe and USA and of a global research market which has been relatively static as a result. Our investments continue to bear fruit with the launch of the ground-breaking social media analysis product (SoMA), the start-up in France and the continued growth of the SixthSense reports business. It is especially pleasing to report a significant improvement in the profitability of the German business under the new management appointed at the beginning of the financial year. This year's results also highlight the successful transition of our Middle Eastern business over recent years from reliance on a major contract (that generated over £3m revenue in its last full year) into a regional leader well placed to exploit that market's growing opportunities

Year-end net cash balances were £7.2m compared to £9.4m at 31 July 2011 after expenditure of £2.5m in the year on earn-out payments for previous acquisitions.

Payment of Dividend

As indicated at the interim results, after careful consideration of the Group's expected performance and cash generation capabilities, the Board is recommending the initiation of a dividend payment of 0.5 pence per share. This reflects our belief that our growth strategy will continue to generate cash without requiring significant cash investment. There will be a final dividend in respect of the year ended 31 July 2012, payable in December 2012, subject to the approval of shareholders. The Board intends to adopt a progressive dividend policy. This reflects the relative stage of maturity that the Group has now achieved. It is also consistent with our aim of using our resources to support growth largely through start-ups and new products while making selective investments and acquisitions if the right opportunities arise.

Strategy

With all our operations this year delivering results expected of them, YouGov has now established a solid base for consistent performance in the future. However, we are still a relatively young company for which innovation remains at the heart of the business. We will continue to utilise our key assets of a strong brand, online methodology based on a highly responsive panel and proprietary technology to meet our customers' changing needs.

The Group has continued this year to deliver the growth strategy outlined by Stephan Shakespeare on his appointment as Chief Executive three years ago. One of our stated goals is to increase the proportion of revenue from data products and services over the medium term and bring these closer to parity with custom research. We aim to exploit YouGov's core strengths in online research to create high value research products and services based on our ability to deliver a continuous flow of accurate, real-time information rapidly and in multiple forms. The focus in the coming year will remain on growing revenue from our core product suite across all our existing geographies and bringing to market the new products already developed. We will also continue to explore opportunities to expand our core model geographically as well as to pioneer new ways of providing clients with the valuable insights of our panel-derived data through our products and services. 

Prospects

We can see from our own surveys and from media and political commentary that business and consumer confidence remain low in Europe although the Middle Eastern and US markets offer more encouraging growth prospects. Against this challenging backdrop we believe that YouGov will continue to outperform the research market both in terms of sales growth and reputation for innovation. We will continue to invest in products and services in pursuit of our strategy. Current trading is in line with the Board's expectations.

Roger Parry

Chairman

15 October 2012

Chief Executive's Review

We are pleased to have delivered another year of revenue and profit growth. Our Group's results for the year reflect our focus on delivering profitable growth as well as the continuing transition to a common YouGov model across all of our geographies. Our US and UK businesses achieved double-digit revenue growth thus further gaining market share as did the locally generated element of our Middle East business. The Nordics operations also grew ahead of the market and the new management team in Germany successfully delivered the profit improvement goals set for them this year.

While our revenue growth was lower in the second half of the year than in the first six months, this was due in part to the ending of the Iraq contract in the first half as well as the re-focusing in Germany on profitable business. However, there was some evidence, notably in the Nordics, of client demand being affected by the continuing economic uncertainties. We have nonetheless continued to win significant business from new clients across all our units including ITV in the UK, Starbucks in USA and Pfizer in the Middle East.

Our planned investment in organic geographic expansion and development of new products is already yielding new products and revenue sources. Our new Social Media analysis tool was beta-launched in May. It is attracting significant interest from media agencies as well as corporate clients and will be marketed fully from the autumn of 2012. SixthSense, our UK-based reports business, continued its expansion with 65% revenue growth. The new French operation which started in November 2011 has grown its panel to over 75,000 and launched French versions of our global BrandIndex and Omnibus products which are selling both to international and local clients.

We have also made good progress in increasing the proportion of revenue from data products and services. This year's new initiatives together with sales of existing products contributed to a 27% growth from this part of our business which now represents 23% of total Group revenue. BrandIndex, our global brand intelligence service, grew by 39% and Omnibus by 22% reflecting its international expansion as well as continuing market leadership in the UK. Custom research revenue across the Group grew by 7% (excluding Iraq) and 1% in headline terms although it still accounts for 77% of our total Group revenue.

YouGov has always valued strong links with the academic community. In September 2011, we set up the YouGov-Cambridge programme with the University of Cambridge to support the academic study of public opinion research on national and transnational issues. In the first year, YouGov-Cambridge has already run three conferences with high profile speakers from business, politics and the media and published several major reports. It is establishing an international reputation as a unique and authoritative research forum as well as providing Cambridge experts with access to panel-based research in support of their studies.

Looking ahead

YouGov has continued to strengthen its foundations while also creating the new products that will serve the market research buyers of the future.

Our interactions with clients indicate that there is a decisive shift of interest among brand-owners and marketers from reliance on information created by traditional market researchers to information created by the consumers themselves. That is why last year we developed (SoMA) as the first product to provide robust social media audience measurement data that covers not only Twitter but also Facebook. This ground breaking product is made all the more powerful when combined with other new YouGov products (some still in beta) including several sector trackers aimed at the investment community, significant enhancements to BrandIndex, an online data dashboard, and new analytics services. All of these will be fully brought to market in the coming year.

YouGov is also significantly expanding its design of the Profile Data Library ("PDL") and the technology for accessing it to provide a comprehensive data-base of consumer behaviour, preferences, social attitudes and the most detailed and dynamic media consumption data on offer. Taken together with SoMA, BrandIndex and our trackers, this will offer an aligned suite of products (a dashboard of live methodically layered data-flow) that helps clients to monitor their brands and markets, design campaigns, plan their media execution, and deliver real-time ROI-tracking for within-campaign adaptive improvement.

YouGov's strategy is, therefore, to make its core offering a systematic marketing data platform that can be used daily by all types of campaigners. YouGov's strong custom research offering enhances and is enhanced by this syndicated offering. Together, they create a complete solution for marketers in an increasingly fast-changing consumer world where consumer-connectivity and fractured media make traditional, slow market research seem inadequate.

As we have stated previously, we are growing both the custom and the syndicated products sides of our business, but are investing more heavily on the latter to bring the revenues to parity.

We have continued to grow in these difficult times by investing in and enhancing our core offering. We have also continued our programme of geographical expansion based around a simple, repeatable version of our core offering. We believe we are building a company that will be among the global leaders of the future.

Review of Operations

YouGov's geographical operations vary in terms of their maturity, size and business mix and the market context in which they operate. In general, syndicated data products generate higher margins than custom research once they reach maturity as their data collection and analysis is carried out once but their outputs can be sold to multiple clients. Omnibus is delivered through a highly standardised process so that its delivery cost is lower than for individual ad hoc research projects and its margins are consequently higher.

These factors are reflected in the differing financial and operational performance of our units. In the year under review our UK unit generated the highest operating margin reflecting the well-established brand and the relatively high proportion of revenue from data products and services. Our US business has largely grown through acquisition and although its scale is increasing, it is still at an early stage of development as a single business. It also has a higher proportion of custom research revenue than the UK and has borne some of the cost of investment in new data products. In Germany, the low operating margin is clearly below the norm due to previously inefficient processes and high operating costs although the transformation programme and the increase in proportion of products revenue have begun to improve margins as planned.

UK

Our UK business once again achieved significant growth and gained market share with revenue 15% up on the prior year. It also maintained its strong margins at 24%. 

This performance was led by the data products and services whose revenue grew by 18% and now accounts for 44% of UK business. BrandIndex continued to win new customers including Superdrug and First Rate and Omnibus grew revenue by 13%. SixthSense maintained its expansion with a 65% revenue growth. It now has over 200 titles covering over 1,000 topic areas.

Custom research grew by 12% overall. As noted at the half year, the UK business benefitted from international clients wishing to take advantage of YouGov's expertise in political, social and reputation research. Although there was continuing budgetary caution among some UK clients, custom revenue generated from the domestic base still grew at 8%, ahead of the market. Our sector teams continued to bring new syndicated products to market to reflect changing market needs such as the Smartphone and Tablet trackers. Their rapid launch also reflects our ability to access early adopters through our panel as well as the general population. Major new clients included Peugeot and ITV while contracts continued with existing clients such as Asda, Argos, Costa Coffee and News International

USA

In the US, revenue grew in total by 21% and organically by 8% (excluding Definitive Insights, acquired in April 2011). The businesses acquired in 2011 and 2010 contributed combined revenue of £11.4m. 

The US data products business continued to perform strongly delivering overall growth of 79% with BrandIndex growing by 75% and the new Hospital Index product doubling its revenue. New clients for BrandIndex in the year included Bank of America and Subway.

Our US custom business which now has a significant base of corporate clients (including Activision, Coca Cola, Microsoft and Panasonic) and particular strength in the technology sector grew its revenue by 16%. The integration of client-facing activities under one brand has progressed well. Synergy benefits have also begun to be released in the back office with the migration of the Harrison IT platform to one of YouGov's global data centres. Doug Harrison, the founder and CEO of Harrison Group has been appointed as CEO of YouGov America to take forward the next stage of the integration of our offices in Portland OR., Waterbury CT. and Lawrenceville, N.J. following the completion of the earn-out periods of the acquired businesses. He will be harnessing the strengths of the combined team going to market under the single YouGov brand so as to extend further our corporate research base in the USA. We also plan to launch a full Omnibus service there in the coming year in line with our strategy of implanting our core model across all our key markets. 

Middle East

This year our Middle East business again delivered strong growth in revenue and profits from regionally generated business while the long-term contract in Iraq as expected, reached completion in December. The regional business operates from offices in Dubai and Saudi Arabia and our panel which now covers 21 countries in the Middle East and North Africa is regarded as the regional leader in terms of quality. Its revenue rose by 19% to £4.9m while the Iraq long-term contract contributed only £1.1m compared to £3.4m in the prior year. We continued the planned expansion in online data services which grew by 38% while the custom business also grew market share with a revenue increase of 16%. Major clients include Pepsico, Saudi Telecom and Johnson & Johnson. In line with the YouGov model of media engagement, we have continued the partnership with Al-Aan TV to provide surveys for their pan-regional Arab language channels. New clients in FY12 include economic development agencies in Dubai and Abu Dhabi. The changing political landscape across the region means we have seen significant interest, particularly from international organisations, in understanding the views and perceptions of populations affected by the Arab Spring. The advantages of online research over traditional research methodologies are reinforced, given the potentially sensitive nature of this type of research in post conflict countries.

Germany

Good progress was made in turning around our German business under the leadership of the new CEO, appointed at the beginning of the year with profits doubling as a result. The reported revenue reflected the disposal and closure respectively of two non-core parts of the business in the prior year. The focus was maintained on profitability rather than revenue and on ensuring that the business is more closely aligned with YouGov's core model. Further savings were achieved in staff numbers and costs and progress was made in the introduction of more efficient business processes. As a result of this programme, the operating margin trebled on an overall revenue increase for the continuing businesses of 4% in local currency terms and 1% in £ terms. The mix of revenue continued also to shift towards data products and services as these rose by 34% while the revenue from custom research fell by 4%. Major clients in the year included Vodafone, ERGO and Zalando as well as many of the leading German regional savings and mutual banks.

Nordic

Our Nordic business achieved another year of solid performance with revenue growth of 6% which was above that of the market and a 23% improvement in operating profit. This was due in large part to an improvement in gross margins with a higher proportion of local work conducted using our own panel, which is one of the strongest in the Nordic region. However, performance was mixed between the three main countries in which we operate. Revenue generated in Denmark, the largest unit which accounts for some 50% of the total, grew by 11% and Norway by 14%. In Sweden, after two years of good growth, the revenue was static due partly to challenging conditions in the market. New clients in the year included Swiss Post, Pandora and Nordic Sugar.

Stephan Shakespeare

Chief Executive Officer

15 October 2012

Financial Performance

Income Statement Review

Group turnover for the year to 31 July 2012 of £58.1m was 4% higher than the prior year and 9% on an underlying basis, excluding the effect of acquisitions, disposals and the completion of the Iraqi contract. The highest growth was in the UK at 15%, the US grew at 8% organically and 21% in total including the effect of the acquisitions made last year. Nordic revenue grew by 6% and Germany by 1% in underlying terms (excluding businesses disposed or closed in the prior year). In the Middle East, local business revenue grew by 19% although total revenue declined by 20% due to the ending of the Iraqi contract during the year.

The Group's gross profit (after deducting costs of panel incentives and external data collection) increased by £2.5m to £44.7m and the gross margin rose by 2% points to 77% from 75%. This is due largely to an increase in the proportion of on-line data collection which incurs lower costs than other methods.

Operating expenses (excluding amortisation and exceptional items) of £39.2m were £2.2m higher than last year, a total increase of 6%. The operating expense ratio rose to 67% compared to 66% in the prior year reflecting the investments in staff made during the year to support continued growth in existing business areas as well as new business initiatives.

The average number of staff (full-time equivalents) employed during the year increased to 482 from 476 in the previous year. The net average growth of 6 staff reflected the addition of 31 heads primarily in the UK & US offset by a reduction of 25 in Germany resulting from the restructuring in that region. Average revenue per head increased to £121k from £118k in the previous year.

Adjusted group operating profit increased by 6% to £5.6m compared to £5.3m in the previous year. Adjusted profit before taxation, which includes net interest income, rose by £0.3m to £6.1m. Adjusted earnings per share1 for the year rose by 0.2p to 4.9p. The reported profit before taxation (after charging amortisation and exceptional items of £4.8m) was £0.4m, the same as in the year ended 31 July 2011.

Amortisation of Intangible Assets and Impairment

Amortisation charges for intangible assets totalled £4.4m (2011: £3.8m) in the year of which £2.0m (2010: £2.3m) related to acquired assets and £1.2m (2011: £0.8m) to those created through the Group's own internal development activities.

Exceptional Items

Exceptional costs of £0.5m (2011: £1.1m) were incurred in the year. £0.6m related to restructuring costs incurred mainly in Germany and in the closure of operations in Iraq and £0.2m to redundancies. These costs were offset by a credit of £0.4m reflecting the net effect of adjustments to the estimated contingent consideration payable in respect of the acquisitions of Harrison and Definitive Insights which were made in the year ended 31 July 2011.

Analysis of Operating Profit and Earnings per Share:

1. Adjusted earnings per share is calculated based on the post-tax result derived from the adjusted profit before tax.

Cash flow

The Group generated £4.9m in cash from operations (before paying interest and tax) (2011: £5.6m) and paid out £5.9m in investing and financing activities (2011: £11.0m). £3.3m of this (2011: £2.7m) related to capital expenditure on tangible and intangible assets and £2.6m (2011: £8.1m) to acquisitions including deferred consideration. 

Taxation

The Group had a tax charge of £0.1m (2011: £nil) on a reported basis, the current tax charge of £0.4m (2011: £0.2m) being partly offset by a deferred tax credit of £0.3m (2011: £0.2m). On an adjusted basis, the tax charge was £1.4m (2011: £1.4m) which represents an implied tax rate of 23% on the adjusted profit before tax and was 1% point lower than the prior year.

Balance Sheet

Total shareholders' funds increased to £55.9m from £55.8m at 31 July 2011 and total net assets increased to £56.0m compared to £55.9m at 31 July 2011. Net cash balances fell by £2.2m to £7.2m from £9.4m as at 31 July 2011 due largely to the cash expenditure on deferred consideration in respect of the US acquisitions made last year. Net current assets increased to £10.3m from £10.0m. Debtor days increased to 63 from 61. Current liabilities increased by £0.5m to £16.9m from £16.4m. Creditor days increased slightly to 35 days from 32 days in 2011. 

Panel development

Panel numbers have grown across all hubs in the current financial year to support the continually increasing levels of online survey activity as well as geographic expansion.

As at 31 July 2012, the Group's online panels comprised a total of 3,310,700 panellists (defined as the number of panel registrations), an increase of 15% over the total of 2,867,100 as at 31 July 2011. The panel sizes by region were:

Corporate Development Activities

As anticipated, a further payment of $3.6m (£2.2m) was made during the year in respect of the acquisition of Harrison Group which brings the total payments to date to $12.6m (£7.8m). A further tranche of deferred consideration of $1.7m (£1.1m) will be payable in 2013. The final total consideration is now estimated to be $0.7m (£0.4m) less than was provided for in the balance sheet as at 31 July 2011 so in accordance with IFRS 3 a corresponding credit has been recognised as an exceptional item.

A further payment of $0.2m (£0.1m) was also made in respect of the acquisition of Definitive Insights ("DI") bringing the total consideration to date to $1.2m (£0.7m). Additional payments, contingent upon the average EBITDA of DI for the two years ending 31 January 2013 and EBITDA growth in the year ending 31 January 2013 will be payable in three instalments between 2013 and 2015. These are estimated to be $1.5m (£0.9m) in total. This is $0.1m (£0.1m) more than anticipated as at 31 July 2011 and a corresponding charge has been recognised as an exceptional item.

On 18 April 2012, the Group invested £0.1m in return for an additional 5% stake in CoEditor Limited thereby increasing its shareholding to 30%. This was as planned under the shareholder agreement with the majority shareholder, Doughty Media 2 (which is 50% owned by Stephan Shakespeare). CoEditor has developed software in the field of news and content aggregation which will be provided exclusively to YouGov for the purpose of providing dedicated content and activities for members of YouGov's online panels. CoEditor's main business objective is to exploit its intellectual property rights in markets and activities outside market research. YouGov also has options to acquire additional shares, which will enable it to benefit from increases in CoEditor's equity value resulting from its business development

Proposed Dividend

The Board is recommending the payment of a final dividend of 0.5 pence per share for the year ended 31 July 2012. If shareholders approve this payment at the AGM, it will be paid on 17 December 2012 to all shareholders who were on the Register of Members at close of business on 7 December 2012.

Publication of Non-Statutory Accounts

The financial information relating to the year ended 31 July 2012 set out below does not constitute the Group's statutory accounts for that year but has been extracted from the statutory accounts, which received an unqualified auditors' report and which have not yet been filed with the Registrar of Companies.

YOUGOV PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

* Total 2012 operating expenses including amortisation of intangibles and the items detailed in note 2 are £43.983m (2011: £41.839m).

Items in the statement above are disclosed net of tax

The financial information on pages 14 to 32 was authorised for issue by the Board of Directors on 15 October 2012.

YouGov plc Registered no. 03607311

YOUGOV PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YOUGOV PLC

consolidated statement of CASH FLOWS

YOUGOV PLC

NOTES TO THE consolidated financial statements

Nature of operations

YouGov plc and subsidiaries' ('the Group') principal activity is the provision of market research.

YouGov plc is the Group's ultimate parent company. It is incorporated and domiciled in Great Britain. The address of YouGov plc's registered office is 50 Featherstone Street, London, EC1Y 8RT United Kingdom. YouGov plc's shares are listed on the Alternative Investment Market of the London Stock Exchange.

YouGov plc's annual consolidated financial statements are presented in UK Sterling, which is also the functional currency of the parent company.

Basis of preparation

The consolidated financial statements of YouGov plc are for the year ended 31 July 2012. They have been prepared under the historical cost convention modified for fair values under IFRS. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU), International Financial Reporting Interpretations Committee (IFRIC) Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.

1 REVENUE AND PROFIT BEFORE TAXATION

Segmental Analysis

For internal reporting purposes the Group is organised into six operating divisions based on geographic lines - UK, Middle East, Germany, Nordic, USA and France. These divisions are the basis on which the Group reports its segmental information. The Group only undertakes one class of business, that of market research.

Inter-segment sales are priced on an arm's length basis that would be available to unrelated third parties.

Inter-segment sales are priced on an arm's length basis that would be available to unrelated third parties.

Management has determined the operating segments based on the reports reviewed by the Executive directors (which is the "chief operating decision maker"). The board of directors review information based on geographic lines - UK, Middle East, Germany, Nordic and North America. These divisions are the basis on which the group reports its segmental information. The group only undertakes one class of business, that of market research.

Differences between the origin and destination of revenue are material to the Group. Revenue by destination is presented below.

Inter-segment sales are priced on an arm's length basis that would be available to unrelated third parties.

Inter-segment sales are priced on an arm's length basis that would be available to unrelated third parties.

2 EXCEPTIONAL COSTS

Restructuring costs in the year primarily relate to the closing of the company's operations in Iraq and further rationalisation activity in Germany. Restructuring costs in the prior year arose due to the termination of operations of certain divisions within the German business.

Acquisition related costs in the year include £87,000 of contingent consideration in respect of the acquisition of Definitive Insights deemed under IFRS 3, to be staff compensation costs and £45,000 of professional fees in respect of acquisitions in the prior year and abortive joint-ventures. Acquisition costs in the prior financial year comprise professional fees incurred relating to the acquisition of Harrison Group and Definitive Insights including £348,000 of deemed staff compensation costs.

The change in estimated contingent consideration comprises a credit of £434,000 in respect of the Harrison Group acquisition and a charge of £79,000 in respect of the Definitive Insights acquisition.

During the year the fair value of the Harrison Group assets acquired was increased by £117,000, as the allowable period of time for finalising the valuation under IFRS3 had ended, this adjustment has been treated as an exceptional item.

Employment termination costs relate to redundancies made in the UK and the Middle East.

A number of investments in joint ventures were written off during the prior financial year, as they no longer traded or the Group no longer had an equity interest in them.

On 30 December 2010, YouGov disposed, through a management buy-out, of Great Place to Work Deutschland GmbH, a wholly owned subsidiary of YouGovPsychonomics AG. The net sale consideration for the shares in GPW Germany was approximately £530,000 payable in cash. At the date of disposal, GPW's net assets were £30,000. Management have apportioned £700,000 of the goodwill pertaining to the acquisition of the Psychonomics Group in 2007 to GPW. As such a loss of £200,000 has been recognised in the prior financial year within exceptional items line of the income statement to reflect this disposal.

According to the terms of the shareholders' agreement for YouGovStone Limited, Carole Stone was entitled to require YouGov plc to purchase some or all of her shareholding of the 49 'B' class shares. The value of this option as at 31 July 2010 was estimated to be £965,000. During the year ended 31 July 2011, an agreement was reached for the purchase of the "B" shares which resulted in a credit being taken in the prior financial year.

3 INCOME TAXES

The taxation charge represents:

The tax assessed for the year is higher (2011: lower) than the standard rate of corporation tax in the UK.

The differences are explained below:

In addition to the changes in rates of Corporation tax reflected above, further changes were announced in the March 2012 UK Budget Statement including a reduction in the main rate of corporation tax from 23% to 22% from 1 April 2014. As this change had not been substantively enacted at the balance sheet date the impact of this change is not included in these financial statements.

The effect of the proposed reduction of 1% in the corporation tax rate from 1 April 2014 would be to reduce the deferred tax asset provided at the balance sheet date by £46,000 and the liability by £5,000 with a net decrease in profit and total comprehensive income of £41,000.

4 DIVIDEND

No dividend was paid during the current or previous financial years . A dividend of 0.5p per share in respect of the year ended 31 July 2012, amounting to a total dividend of £476,000 is to be proposed at the annual general meeting on 12 December 2012. These financial statements do not reflect this proposed dividend payable.

5 EARNINGS PER SHARE

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. Shares held in employee share trusts are treated as cancelled for the purposes of this calculation.

The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post-tax effect of dividends and/or interest, on the assumed conversion of all dilutive options and other dilutive potential ordinary shares.

The adjusted earnings per share has been calculated to reflect the underlying profitability of the business by excluding the amortisation of intangible assets, share-based payments, imputed interest, impairment charges, exceptional items and any related tax effects.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

6 BUSINESS COMBINATIONS AND DISPOSALS

On 18 April 2012, the Group invested £0.1m in return for an additional 5% stake in CoEditor Limited increasing its shareholding to 30%, the majority shareholder is Doughty Media 2 (50% owned by Stephan Shakespeare). CoEditor has developed software in the field of news and content aggregation which will be provided exclusively to YouGov for the purpose of providing dedicated content and activities for members of YouGov's online panels. YouGov also has options to acquire additional shares, which will enable it to benefit from increases in CoEditor's equity value resulting from its business development. In the previous year, the Group had invested £0.5m for a 25% stake in CoEditor Limited.

In the previous financial year the following business combinations and disposals also occurred.

a) Acquisition of Harrison Group

The acquisition of Harrison Group, one of the USA's leading market and strategic research firms was completed on 16 August 2010. The basic purchase consideration payable is six times the EBITDA achieved by Harrison in the year ended 31 December 2010 of $2.4m (£1.5m) amounting to $14.3m (£9.1m). $6.0m (£3.8m) of this was paid on completion, further payments of $3.0m (£1.8m) and $3.6m (£2.2m) were paid in April 2011 and May 2012 respectively. The remaining balance of $1.7m (£1.1m) will be payable in 2013 An additional payment of up to $1.2m (£0.8m), which was originally anticipated to be $0.8m (£0.5m), will be payable in 2013 contingent upon EBITDA growth targets being achieved in the calendar years 2011 and 2012.

This additional payment is now expected to be less than $0.1m (£0.1m). As a result the amount of contingent consideration payable has been reduced by £0.4m with a corresponding credit recognised as an exceptional item.

b) Disposal of Great Place to Work Deutschland GmbH (''GPW Germany'')

On 30 December 2010, YouGov disposed, through a management buy-out, of Great Place to Work Deutschland GmbH, a wholly owned subsidiary of YouGovPsychonomics AG. The net purchase consideration for the shares in GPW Germany was £0.5m payable in cash, in two tranches, £0.3m at 30 December 2010 and the remainder on 30 June 2011. At the date of disposal, GPW's net assets including goodwill were £0.7m and net loss of £0.2m was recognised as an exceptional cost.

c) Purchase of minority shareholding in YouGov ME FZ LLC

On 31 October 2010, YouGov plc purchased the remaining 22% shareholding in its subsidiary YouGov ME FZ LLC from the minority shareholders.

The cash consideration for this purchase was £1.9m. The book value of non-controlling interests at the transaction date was £3.8m. The difference of £1.9m (£1.7m net of associated costs) was reflected directly in reserves in accordance with IAS 27 (revised).

d) Acquisition of Definitive Insights

The acquisition of Definitive Insights ("DI"), a custom research company based in Oregon USA, was completed on 1 April 2011. The basic purchase consideration payable is 4.5 times the average EBITDA of DI for the two years ending 31 January 2013 plus an additional incentive of up to 20% contingent upon EBITDA growth in the year ending 31 January 2013. If the full incentive is paid, this would bring the total multiple up to 5 times EBITDA for the year ending 31 January 2013. An initial payment of $1.0m (£0.6m) was paid upon completion and a further $0.2m (£0.1m) was paid in May 2012 the balance will be payable in three instalments between 2013 and 2015. Half of this contingent consideration is being treated as staff compensation. The treatment of this is discussed in more detail in notes 3 and 4.

Provisional fair value adjustments were made in the 2011 financial statements to align Definitive Insights' accounting policies with those of YouGov and to account for the intangible assets and attributable deferred taxation of the business which are recognised upon acquisition. In the first half of this financial year, management revised these provisional fair value adjustments and the estimated contingent consideration. A prior year adjustment was not recorded on the grounds of materiality.

The amount recognised for each class of Definitive Insights' assets is as follows:

Subsequently the estimated contingent consideration payable has been increased from $1.8m (£1.1m) to $1.9m (£1.2m) and as the period for amending valuations has now closed a charge of £0.1m has been recognised as an exceptional item.

e) Purchase of minority shareholding in YouGovStone Limited

On 6 June 2011, YouGov plc purchased the remaining 49% shareholding in its subsidiary YouGovStone Limited from the minority shareholder Carole Stone.

The consideration for this purchase was part cash of £0.7m and part the issue of new ordinary shares in YouGov plc of £0.1m. The book value of non-controlling interests in assets and liabilities at the transaction date was not material.

7 GOODWILL

In accordance with the Group's accounting policy, the carrying values of goodwill and other intangible assets are reviewed annually for impairment. The cash-generating units (CGUs) are consistent with those segments shown in note 1. The 2012 impairment review was undertaken as at 31 July 2012. This review assessed whether the carrying value of goodwill was supported by the net present value of future cash flows derived from assets using an initial projection period of three years for each CGU based on approved budget numbers. Beyond that, EBITDA growth was assumed to be 5% for years four and five, which is conservative both in comparison with their historical performance and annual growth rates in the internet based market research sector. Annual growth rates of 3% have been assumed in perpetuity beyond year five. The weighted average costs of capital on a pre-tax basis used to discount the future cash flows to their present values are between 10% and 18% (2011: 11.7%). All CGUs, when subjected to sensitivity analyses, decreasing the assumed EBITDA growth and increasing the discount rate by 1%, had sufficient headroom to support their carrying value.

8 OTHER INTANGIBLE ASSETS