System1 Group PLC (AIM: SYS1)

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

UPDATE ON 2019/20 FINANCIAL YEAR; SYSTEM 1 RESPONSE TO COVID-19 IMPACT

System1 Group, the international online market research agency, is today providing the following Trading Update for its financial year to the end of March 2020, together with updates on the impact so far of the Covid-19 pandemic and related matters.

12 MONTHS TO END-MARCH 2020

In our Trading Update released on February 6, 2020, we reported that trading in Q4 to date had slowed. This remained the case through the final weeks of Q4. We therefore expect Sales Revenue and Gross Profit for Q4 to be approximately 25 % below that of the prior year and for the financial year as a whole to be down by approximately 2%, much as we anticipated in February.

The modestly reduced sales for the full year, together with a 1% increase in overhead expenditure, is expected to result in a 2019/20 Profit Before Tax figure (excluding AdRatings and share-based payments)  of  approximately £2.9m, compared with £3.6m in the prior year. Whilst we acknowledge this was a disappointing result, it does exceed our previous expectations.

Investment in AdRatings continued during the year, with expenditure of £1.8m recognised in the income statement, compared with £2.2m in 2018/19. In addition, an impairment charge of £0.9m has been taken in relation to AdRatings development costs in light of the continuing modest AdRatings revenues in the year (£0.05m). On the strength of the industry attention received by AdRatings, we have announced a strategic commercial partnership with ITV, the UK's largest seller of advertising space, to support its customers in creating ever more innovative and effective advertising. We expect to enjoy revenues from these arrangements although it is hard to quantify this while the Covid-19 pandemic continues.

SYSTEM1 RESPONSE TO COVID-19 IMPACT

In response to the Covid-19 pandemic, governments across the world have taken unprecedented actions in recent weeks to limit the spread of the virus. These actions vary considerably by country, and their impact varies considerably by business sector. Since the end of the 2019/20 financial year, System1's trading has inevitably been adversely affected by the global economic situation. The Board has concluded that it is difficult at this stage to provide guidance on the financial performance for the current year until a clearer outlook emerges. The Board will keep investors updated as the impact on the Group's performance becomes clearer.

System1's priority, as we  face up to the challenge presented by the pandemic,  is to maintain a strong  financial position while safeguarding the human and intellectual capital needed to take advantage of  the what the Board believes will be substantial growth opportunities when the global economy recovers. In accordance with this priority, we are monitoring the trends in forward sales, evaluating a variety of plausible revenue scenarios, and taking decisions on our cost base when agreed trigger points are reached. Mitigating actions to date include deferring employment costs, reducing the number of hours paid for where the volume of work has fallen, and taking advantage of government-backed business support and furloughing schemes in the countries where we operate. The Board and other senior executives of System1 have agreed to defer 20% of their salaries until further notice.

Given the emphasis on retaining cash in the current circumstances, the Board has decided to suspend both the proposed buyback programme of up to £1.5m of System1 shares as well as the payment of a final dividend for the 2019/20 financial year. Future returns of capital will be kept under review as the economic situation develops. In addition, the Company arranged and drew down a £2.5m revolving credit facility in March 2020, ending the year with a gross cash balance of £6.6m (2019: £4.3m) and debt of £2.5m.

At this difficult time we are working as closely as possible with our clients, sharing the latest insights on how Covid-19 has impacted consumer feelings and behaviour around the world and strengthening our relationships with them. We believe this will stand us in good stead and benefit our business when conditions improve.

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.

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