YouGov boss feels the heat after share price collapse

YouGov (YOU) chief executive Steve Hatch has only been in the hot seat for 18 months, but a already scathing shareholder letter has called for his removal in a bid to revive the Aim-traded data company’s ailing share price. Is the current boss set for the chop?

In the letter to YouGov’s board last week, activist investor Gatemore called Hatch’s tenure “a disaster” and argued that “the market has lost faith in his leadership”. Gatemore, which bought into the company last year, had already called for a strategic review adn possible sale of the business last November. 

The company’s shares are heavily trailing the wider Aim market after plummeting by two-thirds over the past year (and have now lost almost 40 per cent over five years). The board has struggled to reassure the market about YouGov’s long-term potential. 

Return of the king?

Gatemore is now calling for former chief executive and co-founder Stephan Shakespeare to return as interim boss to oversee a strategic review that could result in YouGov leaving the public market. 

Shakespeare has previously suggested that a US listing could make sense for YouGov after its January 2024 acquisition of GfK’s consumer panel services (CPS) significantly increased the size of the business. But Gatemore thinks YouGov should ultimately be taken private, and it believes that a new management team could deliver a sale at a roughly 85 per cent premium to the current share price.

Shakespeare remains a notable shareholder in YouGov with his 1.53 per cent stake. Hatch, who was given options in December equivalent to 220 per cent of his base salary as part of a long-term bonus plan, has only a 0.04 per cent beneficial interest in the company's shares. 

Part of the problem for YouGov of late – inconsistent as Gatemore points out – has been financial guidance. The shares lost almost half their value in a single trading day last June when the company posted a profit warning. Guidance was then revised up just six weeks later and came in slightly higher still at the October results. But the shares are now sitting lower than the June level after a brief rebound in the third quarter of 2024. 

Analysts at Peel Hunt said late last year that the current management team "is taking the right actions and is on track to meet its cost-savings target". But they noted that "evidence of growth is needed" in the half-year trading statement scheduled for 4 February after a "crucial" budgeting period for the company's clients. 

Gatemore is a relatively small institutional shareholder in YouGov, with a 1.3 per cent holding through its Special Opportunities Fund. But the company should be concerned about its statement that it has received support for its position from “significant shareholders and industry participants”.

YouGov did not respond to a request for comment on the new Gatemore letter. 

A data products problem

At the heart of YouGov’s woes is a slowdown at its data products unit, its highest-margin business, which generates a greater adjusted operating profit than each of the other two businesses (research and CPS). Central to improved cash flow growth hopes and market sentiment is the company getting to grips with issues around price competition and demand. 

Slower than expected revenue and pressure from competition (such as Morning Consult in North America and GWI in the UK) at the unit has dented investor confidence, while the narrative turned from growth to action on costs.

Revenue at the unit fell 2 per cent in the latest year, while operating profit tumbled by over a quarter and the margin plunged by 10 percentage points. The company anticipates improved sales momentum in the second and third quarters of this year. But analysts expect muted single-digit sales growth for data products until at least 2027. 

Taking a step back, YouGov has managed company-wide revenue growth of 17 per cent and operating profit growth of 28 per cent on a 10-year compound annual growth rate basis.

The FactSet consensus is for revenue and operating profit growth of 16 per cent and 27 per cent, respectively, in the year to July 2025 on the back of a full year for CPS. Further out, the company’s unchanged medium-term targets of £650mn of revenue and an operating profit margin of 25 per cent suggest that it remains confident of significant growth ahead, though Gatemore has asked for more detail on the plans being put in place to achieve these goals. 

The share price crash has left YouGov trading on 10 times forward consensus earnings, half the level of last spring.

The company has notable financial and strategic strengths and a significant market opportunity. But Hatch should perhaps muse upon UBS’s comment that “one way to accelerate the rehabilitation process is full and transparent communication with investors and analysts”. A more robust approach is clearly needed.