System1 Group PLC Interim Results

Data : 07/11/2019 @ 08:01
Fonte : UK Regulatory (RNS & others)
Titolo : System1 Group Plc (SYS1)
Quotazione : 202.0  0.0 (0.00%) @ 08:42
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System1 Group PLC Interim Results

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RNS Number : 5676S

System1 Group PLC

07 November 2019

 
 Press Release   7 November 2019 
 

System1 Group PLC (AIM: SYS1)

("System1" or "the Group" or "the Company")

Unaudited interim results for the six months ended 30 September 2019

System1, the marketing services group, today announces its results for the six-month period ended 30 September 2019 ("H1").

 
                                              6 months ended 30 September 
                                                       Unaudited 
                                  2019                        2018 
                                -------  --------------------------------------------- 
 GBPm                                     Restated for IFRS 16*   Previously reported* 
------------------------------  -------  ----------------------  --------------------- 
 Revenue                         13.73            13.18                  13.18 
                                -------  ----------------------  --------------------- 
 Gross Profit                    11.59            10.80                  10.80 
                                -------  ----------------------  --------------------- 
 Underlying Overheads            (9.19)          (8.90)                  (8.88) 
------------------------------  -------  ----------------------  --------------------- 
 Normalised Profit Before Tax     2.40            1.90                    1.92 
                                -------  ----------------------  --------------------- 
 Ad Ratings operating costs      (1.10)          (1.09)                  (1.09) 
                                -------  ----------------------  --------------------- 
 Share Based Payments             0.10              -                      - 
                                -------  ----------------------  --------------------- 
 Exceptional Credit                -              0.25                    0.25 
------------------------------  -------  ----------------------  --------------------- 
 Profit Before Tax                1.40            1.06                    1.08 
------------------------------  -------  ----------------------  --------------------- 
 

Highlights

 
 o   4% growth in Revenue to GBP13.73m (2018/19: GBP13.18m), 
      2% in constant currency 
 o   7% growth in Gross Profit to GBP11.59m (2018/19: GBP10.80m), 
      4% in constant currency 
 o   26% growth in Normalised Profit Before Tax (excluding Ad 
      Ratings costs) to GBP2.40m (2018/19: GBP1.90m*) 
 o   33% growth in Profit Before Tax (including Ad Ratings costs) 
      to GBP1.40m (2018/19: GBP1.06m*) 
 o   34% growth in Profit After Tax (including Ad Ratings costs) 
      to GBP0.89m (2018/19: GBP0.67m*) 
 o   33% growth in diluted Earnings Per Share to 6.9p (2018/19: 
      5.2p*) 
 o   GBP1.17m investment in Ad Ratings, of which GBP0.23m has 
      been capitalised and GBP0.94m expensed (the GBP1.10m of 
      Operating Expenditure in the table above includes GBP0.16m 
      of amortisation) 
 o   GBP4.10m Cash at 30 September 2019 and no debt (31 March 
      2019: GBP4.32m and no debt) 
 o   Maintaining interim dividend at 1.1 pence (2018/19: 1.1 
      pence) 
 

* The Company has implemented IFRS 16 (leases) and as a result restated its prior year results.

Commenting on the Company's results, John Kearon, CEO of System1, said:

"We continue to build out our new world class Agency by leveraging our unique, Advertising Effectiveness IP, data and services. At a time of much change sales, profits and industry profile are growing steadily."

The Company can be found at www.system1group.com.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

For further information, please contact:

 
 System1 Group PLC                     +44 20 7043 1000 
 John Kearon, Chief Executive 
  Officer 
 James Geddes, Chief Financial 
  Officer 
 investorrelations@system1group.com 
 Canaccord Genuity Limited             +44 20 7523 8000 
 Simon Bridges/Andrew Potts 
 
 

INTERIM STATEMENT

Introduction

Gross Profit, our main top-line measure, grew by 7% in H1 (4% in constant currency) to GBP11.59m, building on the 4% growth in H2 of last year. Operating profit margins have also increased. Normalised Profit Before Tax (excluding AdRatings and Share Based Payments) has grown by 26% and Profit Before Tax (after AdRatings and Share Based Payments) by 34%. Note that the Company has implemented IFRS 16 and as a result, restated its results for the comparative period (six months ended 30 September 2019), but the impact on the P&L is small. The Company's balance sheet is strong, with cash at half-year end of GBP4.10m and no indebtedness (other than office leases).

Importantly for future growth, the Company has continued to invest significant amounts in its AdRatings database and services, in its IT infrastructure, and in senior management talent.

Longer Term Context

We operate in most of the world's largest market research geographies and have very large global multinationals as clients. Our market share in those sectors of the market in which the Company competes is small, and we have only a small percentage of the spend of our large, global clients. We therefore have a large untapped addressable market.

The Company is acknowledged as being among the intellectual leaders in our field: measuring the commercial quality of advertising through our market research techniques. Our mission, as 'THE Effectiveness Agency' is to empower marketeers to create world class advertising and prove its value to their business. Our goal is to turn System1's intellectual leadership into commercial leadership, and create a much larger business.

We have spent the last 12-18 months building the world's most predictive advertising effectiveness database of short and long-term profitability (AdRatings), substantially upgrading our IT infrastructure and digitising our products as a foundation to better scaling the business. We have also strengthened the management team's ability to deliver and run a significantly larger business. The Company has made progress in H1.

We have continued to develop AdRatings, which provides ratings of the creative quality, together with the media spend, of all TV adverts in the UK and the US since 2017, in the main industries in which our clients operate. We have four interconnected goals, and taking each in turn:

1. Build the World's largest, and most predictive and validated database of short and long-term advertising effectiveness and use our data to prove the multiplier effect of creativity on business's investment in advertising. We have further enlarged the number of adverts in the database and it now contains the ratings of 42,646 adverts, and is increasing every day as new adverts are aired. There are other sources of advert ratings available, but none to our knowledge where the ratings correlate with long-term profitability, in the way ours does. From analyses within our AdRatings database, Orlando Wood, our Chief Innovation Officer, wrote a book - "Lemon" - which was recently published by the IPA (viewed by many as the world's foremost independent authority on advertising effectiveness).

Lemon is the IPA's centrepiece at its 2019 UK Ad Effectiveness week. We are unaware of any other competing Agency who has such high profile thought leadership in our field of Advertising and Brand effectiveness. Lemon sets out why advertising effectiveness has been in decline over the last few decades and what it will take to reverse the decline at a profound level - and it has received wide industry endorsement. For example, Rory Sutherland, Vice Chairman of Ogilvy said of it: "Any book which finds evidence everywhere from Hans Holbein to the Honey Monster is good by me. But this is an extraordinary and wonderful book, with implications that go far beyond advertising and research".

2. Brand the database and publish our next-day data on any UK or US advert being discussed in the industry press, to drive System1's 'Fame', together with positive feelings towards us, and associate the Company with advertising effectiveness. We believe that this brand-building work derived from our database sets us apart from our competitors. We are increasing the functionality of AdRatings continuously, and currently developing a free mobile App (Hi-5) to make our Creative ratings more widely accessible.

3. Win new clients in our core business. AdRatings has already been a factor in our 18% H1 Comms growth, as well as in our gaining much greater access to marketing leaders in large multinationals, some of whom are exploring the potential benefits to their business of the AdRatings service together with related System1 AdTesting products.

4. Sell subscription revenue. We have a small number of subscribers to date. We have been focussed primarily on building the asset and its branding value and believe that subscriptions will follow.

Across the business as a whole, we are investing ever more in Talent. During H1 we recruited 2 new members to our management team: Karen Wolfe (formerly Vice President Customer Success at Nielsen), as Chief Commercial Officer, and Jon Evans, (formerly UK Marketing Director at Lucozade Ribena Suntory) as Chief Marketing Officer. They follow Stefan Barden (Board Adviser - previously CEO of Wiggle) and Mark Beard (Chief Information Officer - formerly Group Head of IT at Wiggle) who joined during the course of last year.

Over H1 we have continued to build our IT capability and now have a highly skilled IT team of 14, significantly larger and more experienced than was the case 2 years ago. More generally, we have taken early steps to establish a Data and Data Science capability more widely within the business.

Financial Performance

H1 sales growth is not yet on the trajectory we are aspiring to, but we believe we are on the right path. Importantly, Gross Profit from Communications, our core product area, grew 18%.

 
 Gross Profit          2018/19                   2019/20 
 GBPm             Q1     Q2     H1      Q1     Q2     H1     Growth 
--------------  -----  -----  ------  -----  -----  ------  ------- 
 Comms           1.55   1.51   3.06    1.56   2.05   3.61     18% 
                -----  -----  ------  -----  -----  ------  ------- 
 Brand           0.81   0.92   1.73    0.74   0.89   1.63     -6% 
                -----  -----  ------  -----  -----  ------  ------- 
 Innovation      2.53   2.78   5.31    2.84   2.29   5.13     -3% 
                -----  -----  ------  -----  -----  ------  ------- 
 Other           0.25   0.34   0.59    0.57   0.50   1.07     81% 
                -----  -----  ------  -----  -----  ------  ------- 
 Agency          0.08   0.03   0.11    0.01   0.12   0.13     18% 
                -----  -----  ------  -----  -----  ------  ------- 
 AdRatings        -      -       -     0.01   0.01   0.02      NM 
                -----  -----  ------  -----  -----  ------  ------- 
                 5.22   5.58   10.80   5.73   5.86   11.59     7% 
                -----  -----  ------  -----  -----  ------  ------- 
 

The Company has reclassified certain product offerings from 'Other' to 'Innovation' in the current period. The comparative figures have been restated accordingly.

Underlying Overhead Costs (excluding AdRatings) were up 3%. Of that we have invested approximately GBP0.29m in the upgrading of our IT infrastructure, digitisation of our products and strengthening of the management team. Notwithstanding this investment, productivity improvements have enabled increased profit margins: Normalised Profit Before Tax as a percentage of Revenue was 17% in H1 (up from 14% in H1 of the prior year).

 
                                   GBPm    Growth 
-------------------------------  -------  ------- 
 Gross Profit                     11.59      7% 
                                 -------  ------- 
 Overhead Costs                   (9.19)     3% 
                                 -------  ------- 
 Normalised Profit Before Tax*     2.40     26% 
                                 -------  ------- 
 AdRatings Operating Costs        (1.10) 
                                 -------  ------- 
 Share Based Payments              0.10 
                                 -------  ------- 
 Profit Before Tax                 1.40     32% 
                                 -------  ------- 
 

* Normalised Profit Before Tax represents Profit Before Tax prior to AdRatings expenditure and share based payments.

We invested a total of GBP1.17m in AdRatings in H1, of which GBP0.94m is classified as Operating Cost and GBP0.23m Capex (the GBP1.08m of Operating Expenditure in the table above includes GBP0.16m of depreciation). We anticipate investing a similar amount in H2. We plan to continue to manage discretionary spend dynamically - be it Capex or Opex, and whether in AdRatings or in other areas of the business - mindful of our high-growth objective and our cash resources. The business can accommodate around GBP2.0-2.5m of growth investment (including investment in AdRatings) from its operating cash flows at the current run-rate, and we view this as a guide to the cash resources at our disposal for discretionary spend.

Dividends

In line with our dividend policy we are maintaining the interim dividend at the same 1.1 pence per share we paid last year, which in aggregate amounts to GBP0.14m. We are keeping this policy under review.

Tax

The Company's effective tax rate is 37% of Profit Before Tax - similar to the prior year. This is high in the context of the corporation tax rate of 19% in the UK and the Federal corporation tax rate of 21% in the US (the Company's two largest markets). It is due to the high levels of AdRatings cost incurred in the UK (where tax rates are low) without, as yet, associated UK revenue.

Earnings per Share

The Company's share base has not changed over the period, so earnings per share has grown in line with Profit After Tax. Fully diluted earnings per share has grown 33% and basic earnings per share 34%.

The Company has significant stock options which could dilute basic earnings per share in the future. However vested options represent a relatively modest 3% of the Company's voting shares. Unvested options (and conditional share awards) are more significant at 12%. These have been awarded under the Company's long-term incentive plan for its senior team, and only vest in the event of significant growth over the next five years. Minimum vesting (one third of the options) vest when Gross Profit exceeds GBP39.5m and maximum vesting when Gross Profit exceeds GBP77.1m. There is no vesting at Gross Profit levels below GBP39.5m (full details are set out in the Company's 2018/19 Annual Report). Given these performance targets, the dilution suffered by shareholders on vesting will be offset many times over by the value created.

The performance targets are also illustrative of the ambitions of the management team and the growth strategy being pursued.

Cash

We generated Operating Cash Flow pre-financing (and pre AdRatings) of GBP1.67m. This represents 99% of Normalised Profit After Tax (pre-AdRatings and Share Based Payments), which is in line with our normal high cash conversion percentage. After the investment of GBP1.17m in AdRatings, and payment of GBP0.8m in dividends, our cash balance reduced from GBP4.32m on 31 March 2019 to GBP4.10m on 30 September 2019. A summary of our cash flow is below:

 
                                                                      GBPm 
------------------------------------------------------------------  ------- 
 Profit Before Tax (before AdRatings)                                 2.49 
                                                                    ------- 
 Tax paid                                                            (0.17) 
                                                                    ------- 
 Movement in payables                                                (0.98) 
                                                                    ------- 
 Movement in receivables                                              0.37 
                                                                    ------- 
 Other working capital movements, Capex, and non-cash adjustments    (0.04) 
                                                                    ------- 
 Operating Cash Flow pre-financing (pre AdRatings) *                  1.67 
                                                                    ------- 
 AdRatings                                                           (1.17) 
                                                                    ------- 
 Operating Cash Flow pre-financing (post AdRatings) *                 0.50 
                                                                    ------- 
 Dividends                                                           (0.80) 
                                                                    ------- 
 Cash flow                                                           (0.30) 
                                                                    ------- 
 

* Operating Cash Flow pre-financing is our key cash flow performance indicator, and we include office lease costs in calculating this. However, under IFRS 16, office lease costs are treated as a financing activity, and therefore shown as such in our Consolidated Cash Flow Statement.

Balance Sheet

We do not usually have much movement on our balance sheet, with no borrowings, relatively small amounts of fixed assets, no goodwill and stable working capital. However, implementation of the new accounting standard, IFRS 16, means that Property, Plant and Equipment and Non-Current Liabilities have increased significantly to reflect the new accounting treatment for office leases. Nonetheless, it makes little difference to the Income Statement, and there is no economic impact.

Outlook

We continue to have limited short-term revenue visibility, so, as always, it is difficult to predict how the year will unfold. Nevertheless, we continue to believe that the business is making progress and in the longer term has high upside potential driven by its AdRatings asset and the more general digitisation of the business.

   John Kearon                                                     James Geddes 
   Chief Executive Officer                                      Chief Financial Officer 

5 YEAR SUMMARY - HALF YEAR

(GBP000s unless specified otherwise)

 
 Unaudited                                6 months to 30 Sep                    6 months to 30 Jun 
                            ----------------------------------------------  ------------------------- 
                                 2019/20            2018/19        2017/18    2016     2015     2014 
                            -----------------  -----------------  --------  -------  -------  ------- 
                             Ex AR*   Inc AR*   Ex AR*   Inc AR* 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 Financial KPIs 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 Revenue                     13,704    13,725   13,182    13,182    13,822   13,043   11,610   11,197 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
                    growth       4%        4%      -5%       -5%      -10%      12%       4%       4% 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 Gross Profit                11,568    11,589   10,802    10,802    11,394   10,685    9,254    8,719 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
                    growth       7%        7%      -5%       -5%       -9%      15%       6%       3% 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 Administrative Costs         9,023    10,125    8,584     9,674    10,554    9,018    8,080    7,183 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
                    growth       5%        5%     -19%       -8%        8%      12%      12%       -% 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 
 Profit Before Tax            2,485     1,404    2,147     1,057       846    1,650    1,139    1,520 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
                    growth      16%       33%     154%       25%      -70%      45%     -25%      17% 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 Profit After Tax                         890                666       542    1,054      763    1,018 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
                    growth                34%                23%      -70%      38%     -25%      17% 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 EPS - diluted                           6.9p               5.2p      4.2p     7.9p     5.6p     7.5p 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
                    growth                33%                24%      -69%      41%     -25%      12% 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 
 
 Operating Cash Flow **                   498            (1,378)     (604)      810      565    (147) 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 Cash balance                           4,104              3,552     3,495    5,183    5,286    2,528 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 
 
 Dividend (interim)                      1.1p               1.1p      1.1p     1.1p     1.0p     1.0p 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
                    growth                  -                  -         -      10%        -      11% 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 Special dividend                           -                  -     26.1p        -        -    12.0p 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 
 Share buy-backs                            -                  -         -    1,768        -    1,531 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 
 Non-financial KPIs 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 Number of clients                        246                230       229      232      244      225 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
                    growth                 7%                  -       -1%      -5%       8%       6% 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 Gross profit per project                16.6               17.1      18.2     18.3     20.7     18.3 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
                    growth                -3%                -6%      -15%     -12%      13%     -12% 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 Average headcount                        145                140       172      155      160      145 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
                    growth                 4%               -19%       12%      -3%      10%       6% 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
 Gross profit per head                     80                 77        66       69       58       60 
                            -------  --------  -------  --------  --------  -------  -------  ------- 
                    growth                 4%                17%       -1%      19%      -3%      -3% 
--------------------------  -------  --------  -------  --------  --------  -------  -------  ------- 
 

* Ex AR means: excluding AdRatings. Inc AR means: including AdRatings.

** Operating Cash Flow means: before dividends and share buy-backs but inclusive of property lease payments

5 YEAR SUMMARY - ANNUAL

GBP000s unless specified otherwise

 
                                  12 months to 31 Mar                    12 months to 31 Dec 
                     --------------------------------------------  ------------------------------ 
                             2018/19          2017/18    2016/17      2016       2015      2014 
                     ----------------------  --------  ----------  ----------  --------  -------- 
                       Ex AR*      Inc AR* 
-------------------  ----------  ----------  --------  ----------  ----------  --------  -------- 
                      Unaudited   Unaudited   Audited   Unaudited   Unaudited   Audited   Audited 
-------------------  ----------  ----------  --------  ----------  ----------  --------  -------- 
 Financial KPIs 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 Revenue                 26,896      26,899    26,939      32,801      31,236    25,184    24,645 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
             growth          -%          -%      -18%         27%         24%        2%        1% 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 Gross profit            22,047      22,050    22,231      26,984      25,643    20,250    19,410 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
             growth         -1%         -1%      -18%         29%         27%        4%        2% 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 Administrative 
  costs                  17,833      20,050    20,246      20,676      19,414    15,704    15,109 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
             growth        -11%          1%       -2%         30%         24%        4%       -3% 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 Profit Before 
  Tax                     4,079       1,865     1,992       6,279       6,200     4,501     4,286 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
             growth        105%         -6%      -68%         25%         38%        5%       21% 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 Profit After 
  Tax                                 1,212     1,213       4,029       3,968     3,032     2,897 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
             growth                      -%      -70%         19%         31%        5%       19% 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 EPS - diluted                         9.4p      9.5p       31.1p       30.3p     22.7p     21.3p 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
             growth                     -1%      -69%         22%         33%        7%       14% 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 
 
 Operating Cash 
  Flow**                              (421)     1,838       6,603       6,337     2,696     3,157 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 
 Cash balance                         4,315     5,784       8,266       7,754     6,365     5,347 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 
 
 Dividend (interim 
  & final)                             7.5p      7.5p        7.5p        7.5p      4.5p      4.3p 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
             growth                      -%        -%         67%         67%        5%       10% 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 Special dividend                         -     26.1p       12.0p       12.0p         -     12.0p 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 
 Share buy-backs                        (3)         1       3,141       3,195       948     1,938 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 
 Non-financial 
  KPIs 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 Number of clients                      251       204         224         223       243       235 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
             growth                     23%       -9%         -4%         -8%        3%        5% 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 Gross profit 
  per project                          16.5      20.0        23.0        22.6      19.6      20.0 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
             growth                    -18%      -13%         19%         15%       -2%        -% 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 Average headcount                      145       165         161         157       158       152 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
             growth                    -12%        2%          3%         -1%        4%       10% 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
 Gross profit 
  per head                              152       135         168         163       128       128 
                     ----------  ----------  --------  ----------  ----------  --------  -------- 
             growth                     13%      -20%         25%         27%        -%       -7% 
-------------------  ----------  ----------  --------  ----------  ----------  --------  -------- 
 

* Ex AR means: excluding AdRatings. Inc AR means: including AdRatings.

** Operating Cash Flow means: before dividends and share buy-backs but inclusive of property lease payments

CONDENSED CONSOLIDATED INCOME STATEMENT

for the 6 months ended 30 September 2019

 
                         Note                                                      6 months to 
                               --------------------------------------------------------------- 
                                                        30 Sep                          30 Sep 
                                                          2019                            2018 
                                                                          *Restated for IFRS16 
                                                     Unaudited                       Unaudited 
                               -------------------------------  ------------------------------ 
                               Consultancy        Ad            Consultancy        Ad    Total 
                                             Ratings     Total                Ratings 
                               -----------  --------  --------  -----------  --------  ------- 
                                    GBP000    GBP000    GBP000       GBP000    GBP000   GBP000 
                               -----------  --------  --------  -----------  --------  ------- 
 
Revenue                       4     13,704        21    13,725       13,182         -   13,182 
                               -----------  --------  --------  -----------  --------  ------- 
 
Cost of sales                      (2,136)         -   (2,136)      (2,380)         -  (2,380) 
                               -----------  --------  --------  -----------  --------  ------- 
 
Gross profit                  4     11,568        21    11,589       10,802         -   10,802 
                               -----------  --------  --------  -----------  --------  ------- 
 
Administrative 
 expenses                          (9,023)   (1,102)  (10,125)      (8,584)   (1,090)  (9,674) 
                               -----------  --------  --------  -----------  --------  ------- 
 
Operating profit/(loss)              2,545   (1,081)     1,464        2,218   (1,090)    1,128 
                               -----------  --------  --------  -----------  --------  ------- 
 
Finance expense                       (60)         -      (60)         (71)         -     (71) 
                               -----------  --------  --------  -----------  --------  ------- 
 
Profit/(loss) 
 before taxation              4      2,485   (1,081)     1,404        2,147   (1,090)    1,057 
                               -----------  --------  --------  -----------  --------  ------- 
 
Income tax (expense)/credit          (719)       205     (514)        (598)       207    (391) 
                               -----------  --------  --------  -----------  --------  ------- 
 
Profit/(loss) 
 for the financial 
 period                              1,766     (876)       890        1,549     (883)      666 
                               -----------  --------  --------  -----------  --------  ------- 
 
Attributable to 
 equity holders 
 of the Company                      1,766     (876)       890        1,549     (883)      666 
                               -----------  --------  --------  -----------  --------  ------- 
 

*Prior period comparatives have been restated for the transition to IFRS 16

Earnings per share attributable to equity

holders of the Company

 
Basic earnings 
 per share         57.1p  5.3p 
                    ----  ---- 
 
Diluted earnings 
 per share         56.9p  5.2p 
                    ----  ---- 
 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the 6 months ended 30 September 2019

 
                                                                 6 months to             6 months to 
                                                                 30 Sep 2019             30 Sep 2018 
                                                                               *Restated for IFRS 16 
                                                                   Unaudited               Unaudited 
                                                                ------------  ---------------------- 
                                                                      GBP000                  GBP000 
                                                                ------------  ---------------------- 
 
Profit for the financial period                                          890                     666 
                                                                ------------  ---------------------- 
 
Other comprehensive income: 
                                                                ------------  ---------------------- 
Items that may be subsequently reclassified to profit or loss 
                                                                ------------  ---------------------- 
Exchange differences on translating foreign operations                   171                      63 
                                                                ------------  ---------------------- 
Other comprehensive income for the period, net of tax                    171                      63 
                                                                ------------  ---------------------- 
 
Total comprehensive income attributable to equity holders              1,061                     729 
                                                                ------------  ---------------------- 
 

*Prior period comparatives have been restated for the transition to IFRS 16

CONDENSED CONSOLIDATED BALANCE SHEET

as at 30 September 2019

 
                                       Note  30 Sep 2019     31 Mar 2019 
                                                           *Restated for 
                                               Unaudited         IFRS 16 
                                                               Unaudited 
-------------------------------------  ----  -----------  -------------- 
                                                  GBP000          GBP000 
                                       ----  -----------  -------------- 
ASSETS 
                                       ----  -----------  -------------- 
Non-current assets 
                                       ----  -----------  -------------- 
Property, plant and equipment           8          2,630           2,847 
                                       ----  -----------  -------------- 
Intangible assets                       9            916             814 
                                       ----  -----------  -------------- 
Deferred tax asset                                   277             299 
                                       ----  -----------  -------------- 
                                                   3,823           3,960 
                                       ----  -----------  -------------- 
Current assets 
                                       ----  -----------  -------------- 
Contract costs                                       180             208 
                                       ----  -----------  -------------- 
Trade and other receivables                        6,539           6,907 
                                       ----  -----------  -------------- 
Income tax recoverable                                90             431 
                                       ----  -----------  -------------- 
Cash and cash equivalents                          4,104           4,315 
                                       ----  -----------  -------------- 
                                                  10,913          11,861 
                                       ----  -----------  -------------- 
Total assets                                      14,736          15,821 
                                       ----  -----------  -------------- 
 
EQUITY 
                                       ----  -----------  -------------- 
Capital and reserves attributable to 
 equity holders of the Company 
                                       ----  -----------  -------------- 
Share capital                           10           132             132 
                                       ----  -----------  -------------- 
Share premium account                              1,601           1,601 
                                       ----  -----------  -------------- 
Merger reserve                                       477             477 
                                       ----  -----------  -------------- 
Foreign currency translation reserve                 405             234 
                                       ----  -----------  -------------- 
Retained earnings                                  4,554           4,580 
                                       ----  -----------  -------------- 
Total equity                                       7,169           7,024 
                                       ----  -----------  -------------- 
 
LIABILITIES 
                                       ----  -----------  -------------- 
Non-current liabilities 
                                       ----  -----------  -------------- 
Provisions                                           600             610 
                                       ----  -----------  -------------- 
Finance lease payable                              1,851           2,412 
                                       ----  -----------  -------------- 
                                                   2,451           3,022 
                                       ----  -----------  -------------- 
Current liabilities 
                                       ----  -----------  -------------- 
Provisions                                           314             225 
                                       ----  -----------  -------------- 
Finance lease payable                                846             510 
                                       ----  -----------  -------------- 
Trade and other payables                           3,504           4,506 
                                       ----  -----------  -------------- 
Contract liabilities                                 452             534 
                                       ----  -----------  -------------- 
                                                   5,116           5,775 
                                       ----  -----------  -------------- 
Total liabilities                                  7,567           8,797 
                                       ----  -----------  -------------- 
Total equity and liabilities                      14,736          15,821 
                                       ----  -----------  -------------- 
 

*Prior period comparatives have been restated for the transition to IFRS 16

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30 September 2019

 
                                                           Note   6 months to             6 months to 
                                                                  30 Sep 2019             30 Sep 2018 
                                                                                *Restated for IFRS 16 
                                                                    Unaudited               Unaudited 
                                                           ----  ------------  ---------------------- 
                                                                       GBP000                  GBP000 
                                                           ----  ------------  ---------------------- 
 
Net cash generated from / (used by) operations              7           1,550                   (244) 
                                                           ----  ------------  ---------------------- 
Tax paid                                                                (171)                   (304) 
                                                           ----  ------------  ---------------------- 
Net cash generated from / (used by) operating activities                1,379                   (548) 
                                                           ----  ------------  ---------------------- 
 
Cash flows from investing activities 
                                                           ----  ------------  ---------------------- 
Purchase of property, plant and equipment                                (36)                    (22) 
                                                           ----  ------------  ---------------------- 
Purchase of intangible assets                                           (263)                   (246) 
                                                           ----  ------------  ---------------------- 
Net cash used by investing activities                                   (299)                   (268) 
                                                           ----  ------------  ---------------------- 
 
Net cash flow before financing activities *                             1,080                   (816) 
                                                           ----  ------------  ---------------------- 
 
Cash flows from financing activities 
                                                           ----  ------------  ---------------------- 
Interest received                                                           -                       1 
                                                           ----  ------------  ---------------------- 
Finance lease payments                                                   (23)                    (23) 
                                                           ----  ------------  ---------------------- 
Inception of new property leases                                          229                     202 
                                                           ----  ------------  ---------------------- 
Interest paid on office leases                                           (60)                    (72) 
                                                           ----  ------------  ---------------------- 
Property lease payments *                                               (728)                   (670) 
                                                           ----  ------------  ---------------------- 
Dividends                                                               (804)                   (802) 
                                                           ----  ------------  ---------------------- 
Net cash used by financing activities                                 (1,386)                 (1,364) 
                                                           ----  ------------  ---------------------- 
 
Net decrease in cash and cash equivalents                               (306)                 (2,180) 
                                                           ----  ------------  ---------------------- 
 
Cash and cash equivalents at beginning of period                        4,315                   5,784 
                                                           ----  ------------  ---------------------- 
Exchange losses on cash and cash equivalents                               95                    (52) 
                                                           ----  ------------  ---------------------- 
Cash and cash equivalents at end of period                              4,104                   3,552 
                                                           ----  ------------  ---------------------- 
 

* Prior period comparatives have been restated for the transition to IFRS 16. Under IFRS 16 office lease costs are now treated as a "financing activity" (rather than as an operating activity, as was the case previously). Office lease costs are therefore not now 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:

 
                                                     6 months to   6 months to 
                                                     30 Sep 2019   30 Sep 2018 
                                                       Unaudited     Unaudited 
                                                    ------------  ------------ 
                                                          GBP000        GBP000 
                                                    ------------  ------------ 
 
Net cash flow before financing activities                  1,080         (815) 
                                                    ------------  ------------ 
Net cash outflow for property and finance leases           (582)         (563) 
                                                    ------------  ------------ 
Operating Cash Flow                                          498       (1,378) 
                                                    ------------  ------------ 
 

A summary of cash flow before financing activities, separating out AdRatings is presented below.

 
                                                                 6 months to   6 months to 
                                                                 30 Sep 2019   30 Sep 2018 
                                                                   Unaudited     Unaudited 
                                                                ------------  ------------ 
                                                                      GBP000        GBP000 
                                                                ------------  ------------ 
 
Net cash generated from operating activities                           2,321           543 
                                                                ------------  ------------ 
Net cash used by investing activities                                   (67)          (22) 
                                                                ------------  ------------ 
Net cash flow before financing activities (before AdRatings)           2,254           521 
                                                                ------------  ------------ 
Net cash outflow for property and finance leases                       (582)         (563) 
                                                                ------------  ------------ 
Operating Cash Flow (before AdRatings)                                 1,672          (42) 
                                                                ------------  ------------ 
Net cash flow used by AdRatings                                      (1,174)       (1,336) 
                                                                ------------  ------------ 
Operating Cash Flow (after AdRatings)                                    498       (1,378) 
                                                                ------------  ------------ 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the 6 months ended 30 September 2019

 
                            Share  Share premium account    Merger      Foreign currency  Retained earnings    Total 
                          capital                          reserve   translation reserve 
                         --------  ---------------------  --------  --------------------  -----------------  ------- 
Unaudited and restated     GBP000                 GBP000    GBP000                GBP000             GBP000   GBP000 
for IFRS 16 
                         --------  ---------------------  --------  --------------------  -----------------  ------- 
 
At 1 April 2019               132                  1,601       477                   234              4,580    7,024 
-----------------------  --------  ---------------------  --------  --------------------  -----------------  ------- 
 
Profit for the 
 financial period               -                      -         -                     -                890      890 
-----------------------  --------  ---------------------  --------  --------------------  -----------------  ------- 
Other comprehensive 
income: 
----------------------   --------  ---------------------  --------  --------------------  -----------------  ------- 
- currency translation 
 differences                    -                      -         -                   171                  -      171 
-----------------------  --------  ---------------------  --------  --------------------  -----------------  ------- 
Total comprehensive 
 income                         -                      -         -                   171                890    1,061 
-----------------------  --------  ---------------------  --------  --------------------  -----------------  ------- 
 
Transactions with 
owners: 
----------------------   --------  ---------------------  --------  --------------------  -----------------  ------- 
Employee share options 
scheme: 
----------------------   --------  ---------------------  --------  --------------------  -----------------  ------- 
- value of employee 
 services                       -                      -         -                     -               (86)     (86) 
-----------------------  --------  ---------------------  --------  --------------------  -----------------  ------- 
- deferred tax debited 
 to equity                      -                      -         -                     -               (25)     (25) 
-----------------------  --------  ---------------------  --------  --------------------  -----------------  ------- 
Dividends paid to 
 owners                         -                      -         -                     -              (805)    (805) 
-----------------------  --------  ---------------------  --------  --------------------  -----------------  ------- 
                                -                      -         -                     -              (916)    (916) 
 ----------------------  --------  ---------------------  --------  --------------------  -----------------  ------- 
 
At 30 September 2019          132                  1,601       477                   405              4,554    7,169 
                         --------  ---------------------  --------  --------------------  -----------------  ------- 
 
 
6 months ended 30 September 2018 
At 1 April 2018                       132   1,601  477  221  4,578  7,009 
                                     ----  ------  ---  ---  -----  ----- 
Transition to IFRS 16                   -       -    -    -   (96)   (96) 
                                     ----  ------  ---  ---  -----  ----- 
At 1 April 2018                       132   1,601  477  221  4,482  6,913 
                                     ----  ------  ---  ---  -----  ----- 
 
Profit for the financial period         -       -    -    -    666    666 
                                     ----  ------  ---  ---  -----  ----- 
Other comprehensive income: 
                                     ----  ------  ---  ---  -----  ----- 
- currency translation differences      -       -    -   63      -     63 
                                     ----  ------  ---  ---  -----  ----- 
Total comprehensive income              -       -    -   63    666    729 
                                     ----  ------  ---  ---  -----  ----- 
 
Transactions with owners: 
                                     ----  ------  ---  ---  -----  ----- 
Employee share options scheme: 
                                     ----  ------  ---  ---  -----  ----- 
- value of employee services            -       -    -    -     41     41 
                                     ----  ------  ---  ---  -----  ----- 
- current tax credited to equity        -       -    -    -     18     18 
                                     ----  ------  ---  ---  -----  ----- 
- deferred tax debited to equity        -       -    -    -  (100)  (100) 
                                     ----  ------  ---  ---  -----  ----- 
Dividends paid to owners                -       -    -    -  (802)  (802) 
                                     ----  ------  ---  ---  -----  ----- 
                                        -       -    -    -  (843)  (843) 
                                     ----  ------  ---  ---  -----  ----- 
 
At 30 September 2018                  132   1,601  477  284  4,305  6,799 
                                     ----  ------  ---  ---  -----  ----- 
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the 6 months ended 30 September 2019

   1.   General information 

System1 Group PLC ("the Company") is United Kingdom resident, and its subsidiaries (together "the Group") provide marketing and market research consultancy services. The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange ("AIM"). The address of the Company's registered office is Russell Square House, 10-12 Russell Square, London WC1B 5EH.

The Board of Directors approved this condensed consolidated interim financial information for issue on 7 November 2019.

The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006 and is unaudited. The Group's latest statutory financial statements were for the 12-month period ended 31 March 2019 and these have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.

   2.   Basis of preparation 

This condensed consolidated interim financial information has been prepared in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union and on the going concern basis. This financial information should be read in conjunction with the financial statements for the 12-month period ended 31 March 2019, which have been prepared in accordance with IFRSs as adopted by the European Union.

   3.   Principal accounting policies 

The principal accounting policies adopted are consistent with those of the financial statements for the 12-month period ended 31 March 2019, except for the first-time adoption of IFRS 16, 'Leases' which was adopted on 1 April 2019.

IFRS 16 replaced the existing guidance in IAS 17. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a 'right-of-use asset' for virtually all lease contracts. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The weighted average incremental borrowing rate applied to lease liabilities is 4.30%.

   3.   Principal accounting policies (continued) 

A reconciliation of operating lease commitments as at 31 March 2019 to the lease liability is as follows:

 
                                                          GBP000 
                                                         ------- 
Operating lease commitments disclosed at 31 March 2019     5,505 
                                                         ------- 
Adjustment for forecast exercise of break clause         (2,211) 
                                                         ------- 
Effect of discounting                                      (443) 
                                                         ------- 
Lease liability recognised at 1 April 2019                 2,851 
                                                         ------- 
Existing finance lease payables at 1 April 2019               71 
                                                         ------- 
Total finance lease payables at 1 April 2019               2,922 
                                                         ------- 
 

The Group has elected to apply the full retrospective approach to the transition to IFRS 16. The full retrospective approach requires the transition to be implemented with restatement of the prior year results as if IFRS 16 had always been applied. Adoption of the IFRS 16 has resulted in the recognition of Right of use assets and lease liabilities with a corresponding increase in depreciation charges and finance costs offset by a reduction in operating lease costs in the income statement. The implementation of IFRS 16 has made an insignificant impact on the net assets and profit before tax of the Group, as set out in note 12.

   4.   Segment information 

The financial performance of the Group's geographic operating units ("Reportable Segments") is set out below. The Group defines its Consultancy business as Research and Advertising Agency.

 
                         6 months to 30 Sep 2019           6 months to 30 Sep 2018* 
                     --------------------------------  -------------------------------- 
                     Revenue    Gross       Operating  Revenue    Gross       Operating 
                               profit   profit/(loss)            profit   profit/(loss) 
-------------------  -------  -------  --------------  -------  -------  -------------- 
                      GBP000   GBP000          GBP000   GBP000   GBP000          GBP000 
                     -------  -------  --------------  -------  -------  -------------- 
Research 
                     -------  -------  --------------  -------  -------  -------------- 
Americas               7,168    6,147           3,659    5,562    4,637           2,127 
                     -------  -------  --------------  -------  -------  -------------- 
United Kingdom         2,605    2,201             743    2,753    2,277             807 
                     -------  -------  --------------  -------  -------  -------------- 
Continental Europe     3,048    2,450           1,201    3,653    2,916           1,684 
                     -------  -------  --------------  -------  -------  -------------- 
APAC                     742      641             259    1,015      862             524 
                     -------  -------  --------------  -------  -------  -------------- 
                      13,563   11,439           5,862   12,983   10,692           5,142 
                     -------  -------  --------------  -------  -------  -------------- 
Advertising Agency 
                     -------  -------  --------------  -------  -------  -------------- 
United Kingdom           141      129              16      199      110           (302) 
                     -------  -------  --------------  -------  -------  -------------- 
 
Total Consultancy 
 business             13,704   11,568           5,878   13,182   10,802           4,480 
                     -------  -------  --------------  -------  -------  -------------- 
 
AdRatings 
                     -------  -------  --------------  -------  -------  -------------- 
United Kingdom            12       12         (1,081)        -        -         (1,090) 
                     -------  -------  --------------  -------  -------  -------------- 
Americas                   9        9               -        -        -               - 
                     -------  -------  --------------  -------  -------  -------------- 
                          21       21         (1,081)        -        -         (1,090) 
                     -------  -------  --------------  -------  -------  -------------- 
 
                      13,725   11,589           4,797   13,182   10,802           3,750 
                     -------  -------  --------------  -------  -------  -------------- 
 

*In the Annual Report for the year ended 31 March 2019, central delivery costs of GBP892k were allocated to central overheads in the segmental reporting. The comparable central delivery costs are included within the operating profit for reportable segments above for both periods presented.

   4.   Segment information (continued) 

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. Segmental operating profit excludes allocation of central overheads relating to the Group's Operations, IT, Marketing, HR, Legal and Finance teams and Board of Directors.

All revenues are recognised when the research results are delivered to the client.

The split of business by research solution is set out below.

 
                          6 months to 30 Sep 2019    6 months to 30 Sep 2018 
                         -------------------------  ------------------------- 
                           Revenue    Gross Profit    Revenue    Gross Profit 
-----------------------  ---------  --------------  ---------  -------------- 
                            GBP000          GBP000     GBP000          GBP000 
                         ---------  --------------  ---------  -------------- 
Research 
                         ---------  --------------  ---------  -------------- 
Communications (Ad 
 Testing)                    4,047           3,608      3,606           3,059 
                         ---------  --------------  ---------  -------------- 
Brand (Brand Tracking)       2,311           1,628      2,363           1,726 
                         ---------  --------------  ---------  -------------- 
Innovation*                  5,824           5,135      6,166           5,316 
                         ---------  --------------  ---------  -------------- 
Other services               1,381           1,068        848             591 
                         ---------  --------------  ---------  -------------- 
                            13,563          11,439     12,983          10,692 
                         ---------  --------------  ---------  -------------- 
Advertising Agency             141             129        199             110 
                         ---------  --------------  ---------  -------------- 
Total Consultancy 
 business                   13,704          11,568     13,182          10,802 
                         ---------  --------------  ---------  -------------- 
 
AdRatings                       21              21          -               - 
                         ---------  --------------  ---------  -------------- 
                            13,725          11,589     13,182          10,802 
                         ---------  --------------  ---------  -------------- 
 

* The Group has reclassified certain product offerings from 'Other services' to Innovation in the current period, and the comparative period analysis has been restated accordingly.

A reconciliation of total operating profit for Reportable Segments to total profit before income tax is set out below.

 
                                              Six months ended 30 
                                                      Sep 
                                             --------------------- 
                                                  2019        2018 
                                                          Restated 
-------------------------------------------  ---------  ---------- 
                                                GBP000      GBP000 
                                             ---------  ---------- 
 
Operating profit for Consultancy (Research 
 and Agency)                                     5,878       4,840 
                                             ---------  ---------- 
Operating profit for AdRatings                 (1,081)     (1,090) 
                                             ---------  ---------- 
Operating profit for Reportable Segments         4,797       3,750 
                                             ---------  ---------- 
Central overheads                              (3,432)     (2,831) 
                                             ---------  ---------- 
Exceptional credit                                   -         250 
                                             ---------  ---------- 
Share based payments*                               99        (41) 
                                             ---------  ---------- 
Operating profit                                 1,464       1,128 
                                             ---------  ---------- 
 
Finance expense                                   (60)        (71) 
                                             ---------  ---------- 
Profit before income tax                         1,404       1,057 
                                             ---------  ---------- 
 

*Inclusive of associated social security

   5.   Earnings per share 

(a) Basic earnings per share

Basic earnings per share is calculated by dividing profit attributable to equity holders of the Company by the weighted average number of Ordinary Shares in issue during the period:

 
                                              Six months ended 30 
                                                       Sep 
                                             ---------------------- 
                                                   2019        2018 
                                                           Restated 
-------------------------------------------  ----------  ---------- 
 
Profit attributable to equity holders of 
 the Company (GBP000)                               890         666 
                                             ----------  ---------- 
 
Weighted average number of Ordinary Shares 
 in issue                                    12,576,617  12,520,502 
                                             ----------  ---------- 
 
Basic earnings per share                           7.1p        5.3p 
-------------------------------------------  ----------  ---------- 
 

(b) Diluted earnings per share

Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding assuming conversion of all dilutive share options to Ordinary Shares:

 
                                              Six months ended 30 
                                                       Sep 
                                             ---------------------- 
                                                   2019        2018 
                                                           Restated 
-------------------------------------------  ----------  ---------- 
 
Profit attributable to equity holders of 
 the Company (GBP000)                               890         666 
                                             ----------  ---------- 
 
Weighted average number of Ordinary Shares 
 in issue                                    12,576,617  12,520,502 
                                             ----------  ---------- 
Share options                                   327,988     335,227 
                                             ----------  ---------- 
Weighted average number of Ordinary Shares 
 for diluted earnings per share              12,904,605  12,855,729 
                                             ----------  ---------- 
 
Diluted earnings per share                         6.9p        5.2p 
-------------------------------------------  ----------  ---------- 
 
   6.   Dividends 

On 2nd August 2019 the Company paid a final dividend of 6.4 pence per share, amounting to GBP0.80m in respect of the 12-month period ended 31 March 2019. In December 2019, the Company will pay an interim dividend of 1.1 pence per share, amounting to GBP0.14m, in respect of the year ending 31 March 2020. This interim dividend is not recorded in these interim accounts.

   7.   Net cash generated from/(used by) operations 
 
                                                Six months ended 30 
                                                        Sep 
                                               --------------------- 
                                                   2019         2018 
                                                            Restated 
---------------------------------------------  --------  ----------- 
                                                 GBP000       GBP000 
                                               --------  ----------- 
 
Profit before taxation                            1,404        1,057 
                                               --------  ----------- 
Depreciation                                        608          571 
                                               --------  ----------- 
Amortisation                                        160           15 
                                               --------  ----------- 
Finance expense                                      60           71 
                                               --------  ----------- 
Share-based payment (credit)/charge                (86)           41 
                                               --------  ----------- 
Decrease/(increase) in contract costs                28         (17) 
                                               --------  ----------- 
Decrease/(increase) in receivables                  368      (1,405) 
                                               --------  ----------- 
Decrease in payables                              (930)        (476) 
                                               --------  ----------- 
Decrease in contract liabilities                   (82)        (224) 
                                               --------  ----------- 
Exchange differences on operating items              20          123 
                                               --------  ----------- 
Net cash generated from/(used by) operations      1,550        (244) 
---------------------------------------------  --------  ----------- 
 
   8.   Property, plant and equipment 

For the 6 months ended 30 September 2019:

 
                                   Right-of-use assets  Furniture, fittings and equipment  Computer hardware    Total 
                                   -------------------  ---------------------------------  -----------------  ------- 
                                                GBP000                             GBP000             GBP000   GBP000 
                                   -------------------  ---------------------------------  -----------------  ------- 
At 1 April 2019 
                                   -------------------  ---------------------------------  -----------------  ------- 
Cost                                             5,286                                553              1,285    7,124 
                                   -------------------  ---------------------------------  -----------------  ------- 
Accumulated depreciation                       (2,666)                              (422)            (1,189)  (4,277) 
                                   -------------------  ---------------------------------  -----------------  ------- 
Net book amount                                  2,620                                131                 96    2,847 
                                   -------------------  ---------------------------------  -----------------  ------- 
 
6 months ended 30 September 2019 
                                   -------------------  ---------------------------------  -----------------  ------- 
Opening net book amount                          2,620                                131                 96    2,847 
                                   -------------------  ---------------------------------  -----------------  ------- 
Additions                                          260                                  -                 36      296 
                                   -------------------  ---------------------------------  -----------------  ------- 
Disposals                                         (31)                                  -                  -     (31) 
                                   -------------------  ---------------------------------  -----------------  ------- 
Foreign exchange                                   122                                  2                  2      126 
                                   -------------------  ---------------------------------  -----------------  ------- 
Depreciation charge for the year                 (533)                               (37)               (38)    (608) 
                                   -------------------  ---------------------------------  -----------------  ------- 
Closing net book amount                          2,438                                 96                 96    2,630 
                                   -------------------  ---------------------------------  -----------------  ------- 
 
At 30 September 2019 
                                   -------------------  ---------------------------------  -----------------  ------- 
Cost                                             5,541                                561              1,346    7,448 
                                   -------------------  ---------------------------------  -----------------  ------- 
Accumulated depreciation                       (3,103)                              (465)            (1,250)  (4,818) 
                                   -------------------  ---------------------------------  -----------------  ------- 
Net book amount                                  2,438                                 96                 96    2,630 
                                   -------------------  ---------------------------------  -----------------  ------- 
 
   8.   Property, plant and equipment (continued) 

For the 6 months ended 30 September 2018 (restated for IFRS 16):

 
                                    Right-of-use assets  Furniture, fittings and equipment  Computer hardware    Total 
                                    -------------------  ---------------------------------  -----------------  ------- 
                                                 GBP000                             GBP000             GBP000   GBP000 
                                    -------------------  ---------------------------------  -----------------  ------- 
At 1 April 2018 
                                    -------------------  ---------------------------------  -----------------  ------- 
Cost                                              5,018                                562              1,160    6,740 
                                    -------------------  ---------------------------------  -----------------  ------- 
Accumulated depreciation                        (1,863)                              (359)            (1,094)  (3,316) 
                                    -------------------  ---------------------------------  -----------------  ------- 
Net book amount                                   3,155                                203                 66    3,424 
                                    -------------------  ---------------------------------  -----------------  ------- 
 
6 months ended 30 September 2018 
                                    -------------------  ---------------------------------  -----------------  ------- 
Opening net book amount                               -                                203                 66      269 
                                    -------------------  ---------------------------------  -----------------  ------- 
Adjustment on transition to IFRS 
 16                                               3,154                                  -                  -    3,154 
                                    -------------------  ---------------------------------  -----------------  ------- 
Additions                                           202                                  -                 22      224 
                                    -------------------  ---------------------------------  -----------------  ------- 
Disposals                                             -                                (2)                  -      (2) 
                                    -------------------  ---------------------------------  -----------------  ------- 
Foreign exchange                                    155                                  5                  2      162 
                                    -------------------  ---------------------------------  -----------------  ------- 
Depreciation charge for the year                  (492)                               (39)               (40)    (571) 
                                    -------------------  ---------------------------------  -----------------  ------- 
Closing net book amount                           3,019                                167                 50    3,236 
                                    -------------------  ---------------------------------  -----------------  ------- 
 
At 30 September 2018 
                                    -------------------  ---------------------------------  -----------------  ------- 
Cost                                              5,378                                554              1,205    7,137 
                                    -------------------  ---------------------------------  -----------------  ------- 
Accumulated depreciation                        (2,359)                              (387)            (1,155)  (3,901) 
                                    -------------------  ---------------------------------  -----------------  ------- 
Net book amount                                   3,019                                167                 50    3,236 
                                    -------------------  ---------------------------------  -----------------  ------- 
 

For the 12 months ended 31 March 2019 (restated for IFRS 16):

 
                                    Right-of-use assets  Furniture, fittings and equipment  Computer hardware    Total 
                                    -------------------  ---------------------------------  -----------------  ------- 
                                                 GBP000                             GBP000             GBP000   GBP000 
                                    -------------------  ---------------------------------  -----------------  ------- 
At 1 April 2018 
                                    -------------------  ---------------------------------  -----------------  ------- 
Cost                                              5,018                                562              1,160    6,740 
                                    -------------------  ---------------------------------  -----------------  ------- 
Accumulated depreciation                        (1,863)                              (359)            (1,094)  (3,316) 
                                    -------------------  ---------------------------------  -----------------  ------- 
Net book amount                                   3,155                                203                 66    3,424 
                                    -------------------  ---------------------------------  -----------------  ------- 
 
12 months ended 31 March 2019 
                                    -------------------  ---------------------------------  -----------------  ------- 
Opening net book amount                               -                                203                 66      269 
                                    -------------------  ---------------------------------  -----------------  ------- 
Adjustment on transition to IFRS 
 16                                               3,154                                  -                  -    3,154 
                                    -------------------  ---------------------------------  -----------------  ------- 
Additions                                           320                                  1                106      427 
                                    -------------------  ---------------------------------  -----------------  ------- 
Disposals                                             -                                (2)                  -      (2) 
                                    -------------------  ---------------------------------  -----------------  ------- 
Foreign exchange                                    121                                  3                  1      125 
                                    -------------------  ---------------------------------  -----------------  ------- 
Depreciation charge for the year                  (975)                               (74)               (77)  (1,126) 
                                    -------------------  ---------------------------------  -----------------  ------- 
Closing net book amount                           2,620                                131                 96    2,847 
                                    -------------------  ---------------------------------  -----------------  ------- 
 
At 31 March 2019 
                                    -------------------  ---------------------------------  -----------------  ------- 
Cost                                              5,286                                553              1,285    7,124 
                                    -------------------  ---------------------------------  -----------------  ------- 
Accumulated depreciation                        (2,666)                              (422)            (1,189)  (4,277) 
                                    -------------------  ---------------------------------  -----------------  ------- 
Net book amount                                   2,620                                131                 96    2,847 
                                    -------------------  ---------------------------------  -----------------  ------- 
 
   9.   Intangible assets 

Intangible assets of GBP916,000 (31 March 2019: GBP814,000) include GBP885,000 of costs capitalised in respect of the development of the Company's new Ad Ratings product, of which GBP232,000 was capitalised during the period. Costs relating to the research phase of the product, amounting to GBP943,000, have been expensed during the period. Development costs are amortised over their useful economic life of three years.

10. Share capital

At 30 September 2019, the Company had 13,226,773 shares in issue (31 March 2019: 13,226,773) of which 650,156 were held in treasury (31 March 2019: 650,156), and the Company had 1,857,671 stock options outstanding of which 355,823 were fully vested.

On 17 April 2019 the Company granted an advisor to the Board, Stefan Barden, an equity award comprising of 300,000 zero cost options. These options vest in three tranches of 100,000 each subject to Gross Profit and the Company's share price exceeding certain targets. The three tranches lapse on 30 July 2024, 30 July 2029 and 30 July 2032 respectively. Full details of the grant can be found in the Company's Annual Report for the year ended 31 March 2019.

On 4 September 2019 the Company granted 1,058,135 zero cost options to certain members of the senior management team. Of these, 462,934 options were granted as replacements to equity awards made under the 2017 LTIP scheme. The options vest between 12 August 2020 and 12 August 2024, subject to Gross Profit, Profit After Tax and the Company's share price exceeding certain targets. These targets are the same as those set under the 2017 LTIP scheme, full details of which are given in the Company's Annual Report for the year ended 31 March 2019. The options lapse on 21 March 2027.

11. Related party transactions

During the period the Company paid the following dividends to directors:

 
                                                Six months ended 30 
                                                        Sep 
                                               --------------------- 
                                                     2019       2018 
---------------------------------------------  ----------  --------- 
                                                      GBP        GBP 
                                               ----------  --------- 
 
John Kearon                                       189,519    212,493 
                                               ----------  --------- 
James Geddes                                       16,843     15,929 
                                               ----------  --------- 
Ken Ford (resigned from the Board on 24 July 
 2018)                                                  -      1,280 
                                               ----------  --------- 
Robert Brand                                        1,920      1,920 
                                               ----------  --------- 
Graham Blashill                                       640        640 
                                               ----------  --------- 
                                                  208,922    232,262 
---------------------------------------------  ----------  --------- 
 

A family member of James Geddes will receive commission from WeWorks equal to 10% of the first year of rental payments to be made by the Company on its new WeWorks office space in London. This commission will amount to GBP40,000, and was reviewed by, and received the prior approval of, the Company's Audit Committee.

12. Changes in accounting policies

The adoption of IFRS 16, 'Leases' has resulted in the following changes to the previously reported figures:

 
Balance sheet (extract)                             Audited  Impact of IFRS 16      Unaudited 
                                               12 months to                      12 months to 
                                                31 Mar 2019                       31 Mar 2019 
                                                                                     Restated 
--------------------------------------------  -------------  -----------------  ------------- 
                                                     GBP000             GBP000         GBP000 
                                              -------------  -----------------  ------------- 
ASSETS 
                                              -------------  -----------------  ------------- 
Non-current assets 
                                              -------------  -----------------  ------------- 
Property, plant and equipment                           227              2,620          2,847 
                                              -------------  -----------------  ------------- 
Intangible assets                                       814                  -            814 
                                              -------------  -----------------  ------------- 
Deferred tax asset                                      275                 24            299 
                                              -------------  -----------------  ------------- 
                                                      1,316              2,644          3,960 
                                              -------------  -----------------  ------------- 
Current assets 
                                              -------------  -----------------  ------------- 
Contract costs                                          208                  -            208 
                                              -------------  -----------------  ------------- 
Trade and other receivables                           6,915                (8)          6,907 
                                              -------------  -----------------  ------------- 
Current income tax asset                                431                  -            431 
                                              -------------  -----------------  ------------- 
Cash and cash equivalents                             4,315                  -          4,315 
                                              -------------  -----------------  ------------- 
                                                     11,869                (8)         11,861 
                                              -------------  -----------------  ------------- 
Total assets                                         13,185              2,636         15,821 
                                              -------------  -----------------  ------------- 
 
EQUITY 
                                              -------------  -----------------  ------------- 
Capital and reserves 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                    223                 11            234 
                                              -------------  -----------------  ------------- 
Retained earnings                                     4,721              (141)          4,580 
                                              -------------  -----------------  ------------- 
Total equity                                          7,154              (130)          7,024 
                                              -------------  -----------------  ------------- 
 
LIABILITIES 
                                              -------------  -----------------  ------------- 
Non-current liabilities 
                                              -------------  -----------------  ------------- 
Provisions                                              610                  -            610 
                                              -------------  -----------------  ------------- 
Lease liabilities                                        23              2,389          2,412 
                                              -------------  -----------------  ------------- 
                                                        633              2,389          3,022 
                                              -------------  -----------------  ------------- 
Current liabilities 
                                              -------------  -----------------  ------------- 
Provisions                                              225                  -            225 
                                              -------------  -----------------  ------------- 
Lease liabilities                                        48                462            510 
                                              -------------  -----------------  ------------- 
Trade and other payables                              4,591               (85)          4,506 
                                              -------------  -----------------  ------------- 
Contract liabilities                                    534                  -            534 
                                              -------------  -----------------  ------------- 
                                                      5,398                377          5,775 
                                              -------------  -----------------  ------------- 
Total liabilities                                     6,031              2,766          8,797 
                                              -------------  -----------------  ------------- 
Total equity and liabilities                         13,185              2,636         15,821 
                                              -------------  -----------------  ------------- 
 
 

12. Changes in accounting policies (continued)

 
Income statement (extract)         Audited  Impact of IFRS 16      Unaudited 
                              12 months to                      12 months to 
                               31 Mar 2019                       31 Mar 2019 
                                                                    Restated 
---------------------------  -------------  -----------------  ------------- 
                                    GBP000             GBP000         GBP000 
                             -------------  -----------------  ------------- 
 
Operating profit                     1,932                 68          2,000 
                             -------------  -----------------  ------------- 
Finance income/(expense)                 2              (137)          (135) 
                             -------------  -----------------  ------------- 
Income tax expense                   (677)                 24          (653) 
                             -------------  -----------------  ------------- 
 
Profit after taxation                1,257               (45)          1,212 
                             -------------  -----------------  ------------- 
 
 
Cash flow statement (extract)                        Audited  Impact of IFRS 16      Unaudited 
                                                12 months to                      12 months to 
                                                 31 Mar 2019                       31 Mar 2019 
                                                                                      Restated 
---------------------------------------------  -------------  -----------------  ------------- 
                                                      GBP000             GBP000         GBP000 
                                               -------------  -----------------  ------------- 
 
Net cash generated from operating activities             609                925          1,534 
                                               -------------  -----------------  ------------- 
Net cash used by investing activities                (1,030)                           (1,030) 
                                               -------------  -----------------  ------------- 
Net cash used by financing activities                  (982)              (925)        (1,907) 
                                               -------------  -----------------  ------------- 
Net decrease in cash and cash equivalents            (1,403)                  -        (1,403) 
                                               -------------  -----------------  ------------- 
 
Cash and cash equivalents at 31 Mar                    4,315                  -          4,315 
                                               -------------  -----------------  ------------- 
 

12. Changes in accounting policies (continued)

The adoption of IFRS 16, 'Leases' has resulted in the following changes to the previously reported figures:

 
Balance sheet (extract)                          Unaudited  Impact of IFRS 16     Unaudited 
                                               6 months to                      6 months to 
                                               30 Sep 2019                      30 Sep 2019 
                                                                                   Restated 
--------------------------------------------  ------------  -----------------  ------------ 
                                                    GBP000             GBP000        GBP000 
                                              ------------  -----------------  ------------ 
ASSETS 
                                              ------------  -----------------  ------------ 
Non-current assets 
                                              ------------  -----------------  ------------ 
Property, plant and equipment                          217              3,019         3,236 
                                              ------------  -----------------  ------------ 
Intangible assets                                      510                              510 
                                              ------------  -----------------  ------------ 
Deferred tax asset                                     282                  9           291 
                                              ------------  -----------------  ------------ 
                                                     1,009              3,028         4,037 
                                              ------------  -----------------  ------------ 
Current assets 
                                              ------------  -----------------  ------------ 
Contract costs                                         148                  -           148 
                                              ------------  -----------------  ------------ 
Trade and other receivables                          7,115                (7)         7,108 
                                              ------------  -----------------  ------------ 
Current income tax asset                               335                  -           335 
                                              ------------  -----------------  ------------ 
Cash and cash equivalents                            3,552                  -         3,552 
                                              ------------  -----------------  ------------ 
                                                    11,150                (7)        11,143 
                                              ------------  -----------------  ------------ 
Total assets                                        12,159              3,021        15,180 
                                              ------------  -----------------  ------------ 
 
EQUITY 
                                              ------------  -----------------  ------------ 
Capital and reserves 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                   270                 14           284 
                                              ------------  -----------------  ------------ 
Retained earnings                                    4,417              (112)         4,305 
                                              ------------  -----------------  ------------ 
Total equity                                         6,897               (98)         6,799 
                                              ------------  -----------------  ------------ 
 
LIABILITIES 
                                              ------------  -----------------  ------------ 
Non-current liabilities 
                                              ------------  -----------------  ------------ 
Provisions                                             456                  -           456 
                                              ------------  -----------------  ------------ 
Lease liabilities                                       46              2,340         2,386 
                                              ------------  -----------------  ------------ 
                                                       502              2,340         2,842 
                                              ------------  -----------------  ------------ 
Current liabilities 
                                              ------------  -----------------  ------------ 
Provisions                                             407                  -           407 
                                              ------------  -----------------  ------------ 
Lease liabilities                                       47                881           928 
                                              ------------  -----------------  ------------ 
Trade and other payables                             3,950              (102)         3,848 
                                              ------------  -----------------  ------------ 
Contract liabilities                                   356                  -           356 
                                              ------------  -----------------  ------------ 
                                                     4,760                779         5,539 
                                              ------------  -----------------  ------------ 
Total liabilities                                    5,262              3,119         8,381 
                                              ------------  -----------------  ------------ 
Total equity and liabilities                        12,159              3,021        15,180 
                                              ------------  -----------------  ------------ 
 

12. Changes in accounting policies (continued)

 
                                  Unaudited  Impact of IFRS 16     Unaudited 
                                6 months to                      6 months to 
                                30 Sep 2019                      30 Sep 2019 
  Income statement (extract)                                        Restated 
-----------------------------  ------------  -----------------  ------------ 
                                     GBP000             GBP000        GBP000 
                               ------------  -----------------  ------------ 
 
Operating profit                      1,081                 47         1,128 
                               ------------  -----------------  ------------ 
Finance income/(expense)                  1               (72)          (71) 
                               ------------  -----------------  ------------ 
Income tax expense                    (400)                  9         (391) 
                               ------------  -----------------  ------------ 
 
Profit after taxation                   682               (16)           666 
                               ------------  -----------------  ------------ 
 
 
                                                Unaudited  Impact of IFRS 16     Unaudited 
                                              6 months to                      6 months to 
                                              30 Sep 2019                      30 Sep 2019 
  Cash flow statement (extract)                                                   Restated 
-------------------------------------------  ------------  -----------------  ------------ 
                                                   GBP000             GBP000        GBP000 
                                             ------------  -----------------  ------------ 
 
Net cash used by from operating activities        (1,088)                540         (548) 
                                             ------------  -----------------  ------------ 
Net cash used by investing activities               (268)                  -         (268) 
                                             ------------  -----------------  ------------ 
Net cash used by financing activities               (824)              (540)       (1,364) 
                                             ------------  -----------------  ------------ 
Net decrease in cash and cash equivalents         (2,180)                  -       (2,180) 
                                             ------------  -----------------  ------------ 
 
Cash and cash equivalents at 30 Sep                 3,552                  -         3,552 
                                             ------------  -----------------  ------------ 
 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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November 07, 2019 02:01 ET (07:01 GMT)

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