TIDMSYS1
RNS Number : 8145H
System1 Group PLC
01 August 2023
1 August 2023
System1 Group PLC (AIM: SYS1)
("System1" or "the Group" or "the Company")
Preliminary results for the year ended 31 March 2023
System1 Group, the marketing decision-making platform, announces
its unaudited preliminary results for the year ended 31 March
2023.
Highlights
2023 2022
("FY23") ("FY22") Change**
Management Basis* GBPm GBPm %
------------------------------------- ---------------- --------------- -----------
Platform Revenue ("Predict &
Improve") 17.4 12.4 40%
Other Revenue (Bespoke consultancy) 6.0 11.7 -48%
---------------- --------------- -----------
Total Revenue 23.4 24.1 -3%
Gross profit 19.7 20.2 -2%
Adjusted operating costs (18.9) (19.2) -1%
---------------- --------------- -----------
Adjusted profit before taxation 0.8 1.0 -24%
================ =============== ===========
2023 2022 Change**
Statutory Basis GBPm GBPm %
------------------------------------- ---------------- --------------- -----------
Revenue 23.4 24.1 -3%
---------------- --------------- -----------
Gross profit 19.7 20.2 -2%
Operating costs (19.3) (19.6) -1%
Other operating income 0.3 0.3 18%
---------------- --------------- -----------
Profit before taxation 0.7 0.9 -23%
Tax charge (0.3) 0.0 n.m
---------------- --------------- -----------
Profit for the financial year 0.4 0.9 -58%
================ =============== ===========
Diluted earnings per share 3.2p 7.4p
* Adjusted Operating Costs exclude impairment, interest, share
based payments, bonuses and commissions, severance costs and
government grants. Adjusted figures exclude items, positive and
negative, that impede easy understanding of underlying performance.
See note 4 to the consolidated financial statements for further
information.
** Year-on-year percentage change figures are based on unrounded
numbers.
-- Growing sales momentum: H2 Platform Revenue GBP9.8m 29% up on H1 GBP7.6m
-- Full-year platform Revenue GBP17.4m, up 40% year-on year
representing 74% of group revenue (FY22: 52%)
-- Non-platform bespoke consultancy revenue increased slightly
in H2 ending the year at GBP6.0.
-- Gross profit margin improved in H2 resulting in an 84.2%
margin for the year, higher than in FY22 (83.8%)
-- Adjusted Operating Costs, statutory operating costs and headcount all 1% lower than in FY22
-- GBP4m cash investment in platform, products and IP, of which
GBP1.2m capitalised, GBP0.2m amortised (FY22: nil, nil). TYX
platform fully automated across all 3 product groups with
additional features
-- US IP Litigation settled out of court in June 2023
-- Net cash GBP5.7m at 31 March, GBP2.5m revolving credit
facility fully repaid in November 2022
Commenting on the Company's results, James Gregory, Chief
Executive Officer, said:
"The business delivered a strong second half year and created
momentum that has carried through into FY24 with profitable growth
across our platform offering. We are relentlessly executing the
plan outlined in the strategic review with a go-to-market strategy
aimed at winning with the world's largest businesses; new product
channels (digital and audio) amplified by new partnerships, all
spearheaded by a realigned executive team and John Kearon leading
the charge on US growth."
The Company can be found at www.system1group.com.
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) 596/2014 as
amended by regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310. With the publication of this announcement,
this information is now considered to be in the public domain.
For further information, please contact:
System1 Group PLC Tel: +44 (0)20 7043 1000
James Gregory Chief Executive Officer
Chris Willford, Chief Financial Officer
Canaccord Genuity Limited Tel: +44 (0)20 7523 8000
Simon Bridges / Andrew Potts
BUILDING MOMENTUM
FY23 has truly been a year of 2 halves as we have moved from a
period of design and transition to one of relentless commercial
execution. This shone through in our second-half performance. H1
delivered revenue of GBP10.5m down 15% vs prior first half year,
while we addressed the underlying structural issues in the US that
had caused revenue to decline there in FY22 and started a thorough
strategic review of the whole group and how best to grow the
business to create shareholder value. With renewed strategic focus
in H2, we delivered GBP12.9m revenue, up 10% vs the second half of
FY22, as we executed a refined go-to-market strategy, with a
realigned Executive team and clarity of mission.
While total revenue was down for the year (-3% vs FY22), we saw
improving platform growth of 34% H1 FY23 vs prior year and 45% in
H2 FY23 vs prior year, up 40% for FY23 vs prior year as a whole.
This was driven by 44% growth in our data (Predict Your) products
and 23% growth in our data-led consultancy (Improve Your) offer. In
3 years, we have built out a GBP17m platform business that provides
automated, accurate predictions and world class improvement
insights across the advertising, innovation and brand tracking
universe.
We continued investment in developing the platform and product
suite, as well as investing in our sales and marketing functions to
build out the growth engines of the business, while ensuring costs
were held flat (at GBP19m) and gross profit margin was up (to
84.2%). With the core Test Your Ad, Test Your Idea and Test Your
Brand product suite fully automated by May 2022, we increased the
breadth of the offer to cover all marketing channels (Digital and
Audio were recently added to the TV, Print and Outdoor advertising
offering). A year of focussed fame building, amplified by new
partnerships resulted in strong growth in the number of new
platform clients in FY23 (net increase of 31), and new revenue (net
increase of GBP5m, of which GBP3m was from clients recruited in
FY23).
The strategic review offered the business a moment to reflect
and refine its strategy, clarifying how our customers of today and
the future buy marketing predictions and insights and ensuring we
have the capability, structure and focus to deliver these. We have
increased the volume of the voice of the customer in our decision
making; we are clear on how our understanding of emotions drives
business profit, allowing us a unique way in to work with Chief
Marketing Officers in the world's largest advertisers compared with
traditional market research agencies. We are dedicated to creating
a performance-based culture, relentlessly focussed on execution
against our strategy.
As I've recently taken on the role of CEO, I am indebted to the
support and trust of our staff, executive team, board and
shareholders who have backed our refined go-to-market strategy as
well as the continued partnership of our suppliers and commitment
of our industry-leading customers. Personally, I am also incredibly
thankful for continued wise-counsel and support from John Kearon,
throughout the transition this year as we look to take System1 to
the next level of continued, repeatable and sustainable business
growth.
PROGRESS ON STRATEGIC REVIEW INITIATIVES
In FY23, we undertook a thorough strategic review, considering
the best options for growing the business and increasing
shareholder value. The Review validated our existing successful
focus on automated 'Test Your' and 'Improve Your' services for
testing and improving creative content, including all forms of
advertising and product innovations, underpinned by our
world-leading IP, brand tracking and the TYA Premium (formerly
AdRatings) database. We set out clear objectives on areas of
specific focus.
CLARITY ON THE UNIQUE SELLING PROPOSITION
System1 offers unmatchable predictiveness alongside
market-beating speed and value. We translate the language of
creativity, into the language of business - money! Measuring
emotion underpins everything we do, which is why we can be so
predictive.
We have built our product, platform and data-led consultancy
offer on clear IP, that understands and evaluates how emotion
translates to business performance and ultimately profit. We have
tested over 175,000 ads, ideas and brands, through over 12.5
million surveys in over 75 markets, culminating in measurement of
over 27 million emotional responses. Our data science team works
continuously with our product teams to ensure we create and retain
high levels of predictiveness across all products.
Predictiveness alone is not enough, which is why we have
automated the platform that powers our products and data-led
consultancy, allowing us to offer incredible speed, with
predictions provided in under 24 hours, and at a price point that
is competitive.
We know this is why customers come to System1 in the first
instance, and why they remain for years as they see the ROI (Return
on Investment) on their marketing investments.
INCREASED FOCUS ON NON-TV FORMATS
While TV remains crucial to any marketer, digital marketing
spend now accounts for over 50% of global advertising spend and
campaigns are more omnichannel than ever before. So we have built
our offering to cover the full breadth of advertising campaigns,
offering testing for Digital and Audio, alongside our existing
offer of TV, Print and Outdoor. We have also created new
partnerships for these offers, to build credibility, increase fame
and also provide direct access to a large, targeted client
base.
TARGET THE WORLD'S LARGEST ADVERTISERS WITH THE AIM TO GENERATE
RECURRING AND REPEATABLE REVENUE STREAMS
We are fortunate to already work with many of the world's
largest advertisers and have learnt how to embed System1 as a
fundamental part of their marketing and creative process.
Recognising the scale and size of these opportunities, we are
focussed on becoming the partner of choice to all large
advertisers, who have both capacity and funding to test at scale
and the capability to use the predictions and insight to design and
improve marketing campaigns and product development.
We recognise at the same time the opportunity that could exist
to target the long tail of marketing spend, across a very large
number of small businesses and have the ability to serve this
market through our automated self-serve platform. We can also
leverage our partnerships with media platforms such as LinkedIn or
ITV to speak directly with these business without heavy investment
in SEO, SEM and above the line marketing. However, the current
market price point for testing, alongside the capability of these
smaller businesses to use predictions and insights prevent it from
being a likely short-term opportunity for revenue generation for
System1.
WORK WITH COMMERCIAL PLATFORM AND MEDIA PARTNERS TO REDUCE
CUSTOMER ACQUISITION COSTS AND PROVIDE SCALE AND FAME
We have a clear business model to ensure that our partnerships
with global media platforms, creative agencies, industry partners
and professional service firms is successful.
1. Partnerships provide credible fame with global reach.
Our new partnerships are focussed on increasing global presence
in specific channels and each launched with joint thought
leadership content to promote the partnership and grow System1's
fame.
- Pinterest (digital advertising in Europe)
- Finecast (addressable TV advertising US, UK, Canada, Australia)
- Teads (mobile advertising US and UK)
- JCDecaux (out-of-home advertising US and UK)
2. Partnerships provide direct or indirect access to a large customer base.
This access can be formal and direct, such as our partnership
with LinkedIn, where we are part of the LinkedIn B2B Edge
programme, helping LinkedIn grow its advertising revenues by
increasing the effectiveness of the advertisers on their
platform.
This can also be informal, such as our partnership with ITV,
where we jointly host events to promote our thought leadership,
directly to the ITV customer base.
The value we bring to our partners is our ability to help them
increase the spend of their customers on their platforms, or
through their businesses. The value they bring us is increased
credibility, amplification of fame and access to the world's
largest marketing spenders.
SIGNIFICANTLY INCREASE THE FOCUS ON US GEOGRAPHIC MARKET
The US has historically been the largest business for System1
and remains the largest opportunity for growth. A whopping US$321bn
of advertising spend is forecast in 2023, 43% of global advertising
market spend, as well as the US accounting for 53% of global market
research expenditure.
FY23 was a year of re-establishing our team and presence in the
US, as we brought in new leadership with Jason Chebib appointed GM
Americas and John Kearon being in the US to lead our new business
team. We have seen this now kick in to deliver a promising pipeline
of new business prospects. Good progress was made in Q4 where we
won new mandates from 3 of the country's 25 biggest advertising
spenders, including the largest. In H2 the US delivered its highest
half year of revenue since FY21, and standard product revenue
increased by 23% for the year as a whole.
We have set up a new US advisory team that will amplify our fame
and provide introductions to the business, as well as local market
advice. The role of the advisory team will be to help the Company
grow revenue quickly in the US. The team will be led by Jon Bond,
founder of New York agency Kirshenbaum & Bond and now active in
the MarTech space. Noah Brier, a New York digital leader, will also
be on the team. He is the founder of BrXnd.ai, co-founder of
Variance and Percolate and one of the leading talents in the US
MarTech space. We are in discussions with other prominent US sector
specialists to join this team.
OUTLOOK
FY24 has started promisingly, continuing the momentum of revenue
growth and new wins from H2 FY23. We expect the growth in platform
revenue to continue, which taken together with the levelling out of
revenue in bespoke consultancy, should lead to overall revenue
growth in FY24. The launch of TYA Digital and TYA Audio products
early in FY24 has increased TYA's addressable market. The new
global partnerships provide access to prospective customers,
thereby increasing our reach. One year in, our US commercial team
is making good progress and we are continuing to focus marketing
and business development investment in the US. We have signed 3 new
global mandates for world-leading advertisers already this year and
are excited about the prospects in the pipeline.
Once more, thank you to our staff whose daily efforts are the
energy behind our business, to our customers for their commitment
to delivering marketing that works and to our shareholders for
their support as we deliver on the potential of the business.
JAMES GREGORY - CEO
Financial Review
Overview
2023 2022 Change Change**
GBPm GBPm GBPm %
---------------- -------------- ------------ ---------
Platform Revenue ("Predict
& Improve") 17.4 12.4 4.9 40%
Other Revenue (Bespoke consultancy) 6.0 11.7 (5.6) -48%
---------------- -------------- ------------ ---------
Total Revenue 23.4 24.1 (0.7) -3%
Direct Costs (3.7) (3.9) (0.2) -8%
Gross profit 19.7 20.2 (0.5) -2%
Adjusted operating costs* (18.9) (19.2) (0.3) -1%
---------------- -------------- ------------ ---------
Adjusted profit before taxation* 0.8 1.0 (0.2) -24%
Statutory profit before taxation 0.7 0.9 (0.2) -23%
Tax credit/(charge) (0.3) 0.0 (0.3) nm
---------------- -------------- ------------ ---------
Statutory profit for the financial
year 0.4 0.9 (0.5) -58%
================ ============== ============ =========
*All figures in the Financial Review are presented in millions
rounded to one decimal place unless specified otherwise. Percentage
movements are calculated based on the numbers reported in the
financial statements and accompanying notes. Adjusted Cost and
Profit figures are as defined in the Highlights section.
** Year-on-year percentage change figures are based on unrounded
numbers.
KPIs
2023 2022
Platform Revenue % total Revenue 74 52
Platform Revenue growth % 40 na
Gross Profit % Revenue 84.2 83.8
Adjusted EBITDA GBPm (1) 1.8 2.1
Adjusted EBITDA % Revenue 8 9
"Rule of 40" (2) 48 na
Free cash flow(3) (3.1) 2.5
Net cash GBPm 5.7 8.7
(1) Statutory profit before taxation + share-based payments
+ interest, depreciation and amortisation
(2) Platform Revenue growth %+ Adjusted Group EBITDA
% Group Revenue
(3) Cash flow after interest and before debt raising/reduction,
buybacks/dividends
Revenue performance
Platform revenue rose by GBP4.9m (40%) in the year to GBP17.4m
with particularly strong growth in automated ad-testing revenues.
Predict Your platform revenue rose 44% fuelled by the continued
success of Test Your Ad. Improve Your platform-led consultancy
revenue increased by 23%. Overall platform revenue represented 74%
of total revenue in FY23, compared with 52% in the previous year.
In line with recent trends, other revenue, primarily bespoke
consultancy, fell GBP5.6m year on year as customers continued to
adopt the standard platform products, and the company focussed its
resources on the TYX platform-based product suite.
The Communications product group, including Test Your Ad, grew
by GBP0.9m (6%) year-on-year, notably in the UK and the US.
Communications revenue, including ad-testing, accounted 68% of all
revenue in FY23 (FY22: 62%) Brand tracking revenues increased by
GBP0.4m (13%) helped by wins in the Americas and APAC. Innovation
revenues were down in all regions, GBP2.0m (35%) lower overall than
the previous year, with the launch of Test Your Idea arriving too
late in the year to reverse the trend. The geographic spread of the
business remained similar to the previous period. The Americas
region grew for the second consecutive year helped by a buoyant
LatAm performance, and the UK again showed double-digit growth year
on year. Continental Europe was affected, particularly in the first
half of the year, by customers' budgetary response to the Ukraine
invasion and associated economic shocks.
Expenditure
Total expenditure fell by GBP0.4m versus last year, with direct
costs and administrative expenses each GBP0.2m lower. The reduction
in direct costs was due partly to lower sales volume and partly to
improved cost management, with gross profit margin rising to 84.2%
from 83.8%.
Adjusted operating expenditure
The company invested an additional GBP0.7m in customer
acquisition costs, mainly additional employee costs in Sales and
Marketing, and a further GBP0.4m in IT development in order to
accelerate the development of the platform. Adjusted operating
costs featured increased investment in the sales, marketing and IT
development teams. These investments in platform revenue growth
were funded by reductions totalling GBP1.0m in operational expenses
including savings in outsourced services and the capitalisation of
GBP1.2m platform development costs. Travel and entertaining
expenditure increased by GBP0.3m from a very low base with the
return of international travel after two years of restrictions
caused by the Covid pandemic.
Other expenditure
Other expenditure comprises expenditure items and
charges/credits which are excluded from adjusted operating
expenditure. Other expenditure was broadly unchanged year on year
with a GBP0.4m reduction in the share-based payment charge being
offset by the non-repetition of a prior-year credit relating to
IFRS16 lease impairment reversal, and reductions in sabbatical
provision releases and government innovation grant funding.
Profit before taxation
Adjusted profit before taxation for the year of GBP0.8m was
GBP0.2m lower than the previous year owing to the flow through of
slightly lower sales volumes. Likewise, statutory profit before tax
of GBP0.7m was GBP0.2m lower than last year.
Tax
The Group's effective tax rate increased from -1% (tax credit)
to 44%. This is due mainly to the impact of R&D tax credits
(GBP0.5m recognised in FY22, GBPnil in FY23). R&D claims for
FY22 and FY23 are in progress, but are yet to be approved and have
not been recognised in the financial statements.
Funding and liquidity
Cash net of debt reduced from GBP8.7m to GBP5.7m during the
year, with the outflows concentrated in H1 reflecting continued
investment in the TYX platform and customer acquisition costs
during a period of reduced customer demand in Europe following
Russia's invasion of Ukraine. A further GBP0.1m was spent on
repurchasing shares in H1 before the programme was suspended ahead
of the Group's review of strategic options in the autumn. Operating
cash flow trends improved in H2 in line with revenue and
profitability, the latter being helped by improved gross margins
and lower year-on-year adjusted operating costs. The Group repaid
in full a GBP2.5m revolving credit facility in November after
reviewing the outlook for interest rates and the expected cash
requirements and replaced it with an as-yet unutilised overdraft
facility.
Some GBP4.0m cash was invested in product innovation and
development in the year, related primarily to the TYX marketing
predictions platform, development of new intellectual property,
automated prediction products and the TYA Premium (formerly
AdRatings) database.
Litigation
On 27 September 2021, the Company filed a complaint for
trademark infringement, unfair competition and deceptive trade
practices at the United States District Court Southern District of
New York against System1 LLC ("LLC"), since renamed System1 Inc.,
an omnichannel customer acquisition marketing provider, over their
infringing use of the mark "SYSTEM1". On 30 June 2023 the Company
announced that a settlement had been reached with LLC. The parties
have signed a global agreement which governs the co-existence of
their respective use of the "System1" mark in connection with their
operations. As part of this agreement, the Company is receiving a
fixed undisclosed payment payable in instalments. The parties have
agreed to keep further detail of their agreement confidential.
CHRIS WILLFORD - CFO
Consolidated Income Statement (unaudited)
for the year ended 31 March 2023
Note 2023 2022
GBP'000 GBP'000
------------------ -------------------
Revenue 3 23,410 24,097
Cost of sales (3,692) (3,898)
------------------ -------------------
Gross profit 3 19,718 20,199
Administrative expenses (19,203) (19,383)
Other operating income 340 289
Operating profit 855 1,105
Finance expense (136) (160)
Profit before taxation 719 945
Income tax (expense)/credit (315) 10
Profit for the financial year 404 955
================== ===================
Attributable to the equity
holders of the Company 404 955
------------------ -------------------
Earnings per share attributable
to equity holders of the Company
Basic earnings per share 5 3.2p 7.4p
Diluted earnings per share 5 3.2p 7.4p
Consolidated Statement of Comprehensive Income (unaudited)
for the year ended 31 March 2023
2023 2022
GBP'000 GBP'000
=========== ==========
Profit for the financial year 404 955
=========== ==========
Other comprehensive income:
Items that may be subsequently reclassified to profit/(loss)
Currency translation differences on translating foreign operations 227 342
----------- ----------
Other comprehensive profit for the period, net of tax 227 342
Total comprehensive income for the period attributable to equity holders of the Company 631 1,297
=========== ==========
Consolidated Balance Sheet (unaudited)
as at 31 March 2023
Registered company no. 05940040
Note 2023 2022
GBP'000 GBP'000
------------- ------------
ASSETS
Non-current assets
Property, plant, and equipment 1,162 2,054
Intangible Assets 1,396 382
Deferred tax asset 203 292
------------- ------------
2,761 2,728
Current assets
Contract assets 102 198
Trade and other receivables 6,344 4,492
Income tax receivables 55 -
Cash and cash equivalents 5,719 11,174
------------- ------------
12,220 15,864
Total assets 14,981 18,592
============= ============
EQUITY
Attributable to equity holders of the Company
Share capital 132 132
Share premium account 1,601 1,601
Merger reserve 477 477
Foreign currency translation reserve 423 196
Retained earnings 5,974 5,857
------------- ------------
Total equity 8,607 8,263
------------- ------------
LIABILITIES
Non-current liabilities
Provisions 353 432
Lease liabilities 362 1,417
------------- ------------
715 1,849
Current liabilities
Provisions 101 77
Lease liabilities 1,094 1,091
Borrowings - 2,500
Contract liabilities 764 991
Income taxes payable - 267
Trade and other payables 3,700 3,554
------------- ------------
5,659 8,480
Total liabilities 6,374 10,329
Total equity and liabilities 14,981 18,592
============= ============
Consolidated Statement of Cash Flows (unaudited)
for the year ended 31 March 2023
Note 2023 2022
GBP'000 GBP'000
--------------- ------------
Net cash used in/generated from operations (87) 4,098
Tax paid (541) (63)
--------------- ------------
Net cash used in/generated from operating activities (628) 4,035
Cash flows from investing activities
Purchases of property, plant, and equipment (30) (79)
Purchase of intangible assets (1,225) (59)
--------------- ------------
Net cash used by investing activities (1,255) (138)
Net cash flow before financing activities (1,883) 3,897
Cash flows from financing activities
Interest paid (136) (161)
Property lease liability payments (1,052) (1,218)
Purchase of own shares (135) (567)
Repayment of borrowings (2,500) -
--------------- ------------
Net cash used by financing activities (3,823) (1,946)
Net (decrease)/increase in cash and cash equivalents (5,706) 1,951
Cash and cash equivalents at beginning of year 11,174 9,008
Exchange gain on cash and cash equivalents 251 215
Cash and cash equivalents at end of year 5,719 11,174
=============== ============
Office lease costs are not included within "Net cash flow before
financing activities" (the Company's key cash flow performance
indicator). "Net cash flow before financing activities", adjusted
for office leases, known by the Company as "Operating cash flow" is
shown below:
2023 2022
GBP'000 GBP'000
------------- -----------
Net cash flow before financing activities (1,883) 3,897
Net cash flow for property leases (1,115) (1,307)
------------- -----------
Operating cash flow (2,998) 2,590
------------- -----------
Consolidated Movements in Net Cash/(Debt)
Cash and Lease
cash equivalents Borrowings liabilities Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------ ----------- ------------- ---------
At 1 April 2022 11,174 (2,500) (2,508) 6,166
Cash flows (5,706) 2,500 1,051 (2,155)
Non-cash charges
Interest on lease liabilities - - (64) (64)
Exchange and other non-cash movements 251 - 65 316
At 31 March 2023 5,719 (0) (1,456) 4,263
================== =========== ============= =========
Consolidated Statement of Changes in Equity (unaudited)
for the year ended 31 March 2023
Foreign
currency
Share premium translation Retained
Note Share capital account Merger reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- --------------- --------------- --------------- --------------- --------
At 31 March 2021 132 1,601 477 (146) 5,170 7,234
Profit for the
financial year - - - - 955 955
Other
comprehensive
income:
- currency translation
differences - - - 342 - 342
Total comprehensive
income - - - 342 955 1,297
Transactions
with owners:
Employee share
options:
- value of employee
services - - - - 299 299
Purchase of treasury
shares - - - - (567) (567)
At 31 March 2022 132 1,601 477 196 5,857 8,263
============== =============== =============== =============== =============== ========
Profit for the
financial year - - - - 404 404
Other
comprehensive
income:
- currency translation
differences - - - 227 - 227
Total comprehensive
income - - - 227 404 631
Transactions
with owners:
Employee share
options:
- value of employee
services - - - - (153) (153)
Purchase of treasury
shares - - - - (134) (134)
At 31 March 2023 132 1,601 477 423 5,974 8,607
============== =============== =============== =============== =============== ========
Notes to the Consolidated Financial Statements
for the year ended 31 March 2023
1. General information
System1 Group PLC (the "Company") was incorporated on 19
September 2006 in the United Kingdom. The Company's principal
operating subsidiary, System1 Research Limited, was at that time
already established, having been incorporated on 29 December 1999.
The address of the Company's registered office is 4 More London
Riverside, London, England, SE1 2AU. The Company's shares are
listed on the AIM Market of the London Stock Exchange ("AIM").
The Company and its subsidiaries (together the "Group") provide
market research data and insight services. The Chief Executive's
Statement and the Finance Review provide further detail of the
Group's operations and principal activities.
The unaudited summary financial information set out in this
announcement does not constitute the Group's consolidated statutory
accounts for the years ended 31 March 2023 and 2022. The results
for the year ended 31 March 2023 are unaudited. The statutory
accounts for the year ended 31 March 2023 will be finalised on the
basis of the financial information presented by the Directors in
this preliminary announcement and will be delivered to the
Registrar of Companies in due course. The statutory accounts are
subject to completion of the audit and may also change should a
significant adjusting event occur before the approval of the Annual
Report.
The statutory accounts for the Group for the year ended 31 March
2022 have been reported on by the Group's auditor and delivered to
the Registrar of Companies. The auditor's report on those accounts
was unqualified and did not include references to any matter which
the auditors drew attention by way of emphasis without qualifying
their report and did not contain statements under section 498(2) or
(3) of the Companies Act 2006.
The unaudited summary financial information set out in this
announcement have been prepared using the accounting policies as
described in the 31 March 2022 audited year end statutory accounts
and have been consistently applied. The preliminary announcement
for the year ended 31 March 2023 was approved by the Board for
release on 1 August 2023.
2. Basis of preparation
The Group has prepared its consolidated financial statements in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and applicable law.
The consolidated financial statements have been prepared under the
historical cost convention.
The preparation of financial statements in accordance with
International Financial Reporting Standards ("IFRS") requires the
use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the
Group's accounting policies.
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ("the Functional
Currency"). The consolidated financial statements are presented in
Pounds Sterling (GBP), which is the Company's functional and
presentation currency. The financial statements are presented in
round thousands unless otherwise stated.
3. Segment information
The financial performance of the Group's geographic operating
units ("Reportable Segments") is set out below.
2023 2022
----------- -----------
Revenue Revenue
GBP'000 GBP'000
----------- -----------
By location of
customer
Americas 9,428 9,043
United Kingdom 8,895 7,918
Rest of Europe 3,741 5,463
APAC 1,346 1,673
----------- -----------
23,410 24,097
Segmental revenue is revenue generated from external customers
and so excludes intercompany revenue and is attributable to
geographical areas based upon the location in which the service is
delivered.
Consolidated balance sheet information is regularly provided to
the Executive Directors (the Chief Decision-Making officers) while
segment balance sheet information is not. Accordingly, the Company
does not disclose segment balance sheet information here.
2023 2022
------------- -----------
Revenue Revenue
GBP'000 GBP'000
------------- -----------
By product type
Predict Your (data) 14,060 9,747
Improve Your (data-led consultancy) 3,311 2,683
------------- -----------
Standard (platform) revenue 17,371 12,430
Other consultancy (non-platform) 6,039 11,667
------------- -----------
Total revenue 23,410 24,097
By product group
Communications (Ad Testing) 15,879 14,955
Brand (Brand Tracking) 3,669 3,295
Innovation 3,862 5,847
------------- -----------
23,410 24,097
As the Company is domiciled in the UK, its consolidated
non-current assets, other than financial instruments and deferred
tax assets are as follows:
2023 2022
GBP'000 GBP'000
------------ ------------
Non-current assets
United Kingdom 2,204 1,846
Rest of world 354 590
------------ ------------
2,558 2,436
4. Reconciliation between Operating Costs and Adjusted Operating Costs
2023 2022
GBP'000 GBP'000
--------------------- ---------------
Administrative expenses 19,203 19,383
Finance expense 136 160
--------------------- ---------------
Total operating costs 19,339 19,543
===================== ===============
Less: Adjusting items
Impairment - (235)
Compensation for loss of
office 39 81
Bonus and commissions expense 453 268
Share-based payment expense (171) 270
Other interest expense 73 70
Other staff costs (82) (211)
Trademark litigation 111 150
--------------------- ---------------
423 393
Adjusted operating costs 18,916 19,150
===================== ===============
5. Earnings per share
2023 2022
----------- ------------
Profit attributable to equity holders of the
Company, in GBP'000 404 955
Weighted average number of Ordinary Shares
in issue 12,698,398 12,863,257
Basic earnings per share 3.2p 7.4p
Profit attributable to equity holders of the
Company, in GBP'000 404 955
Weighted average number of Ordinary Shares
in issue 12,698,398 12,863,257
Share options 12,888 12,881
----------- ------------
Weighted average number of Ordinary Shares
for diluted earnings per share 12,711,286 12,876,138
Diluted earnings per share 3.2p 7.4p
Basic earnings/(losses) per share is calculated by dividing the
profit or loss attributable to equity holders of the Company by the
weighted average number of Ordinary Shares in issue during the
year.
Diluted earnings/(losses) per share is calculated by adjusting
the weighted average number of shares outstanding assuming
conversion of all dilutive share options to Ordinary Shares.
Options are included in the determination of diluted earnings per
share if the required performance thresholds would have been met
based on the Group's performance up to the reporting date, and to
the extent that they are dilutive.
Employee options of 1.3 million (2022: 1.2 million) have not
been included in the calculation of diluted EPS because their
exercise is contingent on the satisfaction of certain criteria that
had not been met at 31 March 2023.
6. Dividends
The Company did not pay an interim dividend in the year ended 31
March 2023 and does not propose the payment of a final
dividend.
No dividends were paid to directors in the years ended 31
March
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END
FR MZGFNLMGGFZM
(END) Dow Jones Newswires
August 01, 2023 02:00 ET (06:00 GMT)
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