21 April 2021

SYSTEM1 GROUP PLC (AIM: SYS1)

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

Year End Trading Update

System1 Group, the Advertising Effectiveness Agency, is today providing a Trading Update for its financial year to the end of March 2021 ahead of its results announcement on 29 June 2021.

12 MONTHS TO END-MARCH 2021

Our Interim Statement released on 17 November 2020 reported that Revenue and Adjusted Profit had recovered substantially since Q1 and that the sales pipeline was strong.  This improvement was maintained throughout the second half-year such that Revenue in H2 was approximately 8% above that of the equivalent prior year period, compared with a 26% decline in H1. As a result, the full year Revenue reduction was 11%.

Profitability was stronger in H2 than in H1 as sales picked up faster than adjusted operating costs which were 16% lower than last year in the second half.

We expect to report a pre-tax Adjusted Profit (which excludes impairment, share-based payments, government support, bonuses, loan interest and certain provisions) of some £2.9m for the full year (FY 2019/20: £2.0m). The business continued to generate cash, ending the period with £6.5m cash net of debt versus £4.2m at the previous year end. The net cash figure does not include a £0.5m tax credit for FY 2019/20 which was received early in April 2021.

Underlying the recent improvement is the success of Test Your Ad, System1's first fully automated predictive product set. The transition to automated data products supported by data-enabled, repeatable consultancy products is well underway: data products represented 15% of Sales Revenue in Q4 - mainly Test Your Ad - compared with 1% in H1.  We expect the proportion of data product revenues to increase with the rollout in 2021/22 of Test Your Brand.

With the resumption of sales growth and a strong net cash position, the Company will look to reinstate the share buyback programme which was suspended in 2020 due to uncertainty over the potential impact of the Covid pandemic on our business. A return to dividend payments is not currently envisaged. More information will be provided on the proposed buyback later in the year.

OUTLOOK

System1 is focused on achieving Revenue growth over the short and medium term. In pursuit of this goal the Company will increase discretionary investment in product development, IT, marketing, and relationships with advertising agencies and advertising platform partners. We will also continue to recruit new talent, after a sizeable increase in headcount during the latter months of 2020/21 which took year-end headcount to 147 from 128 at the half year. The drive for further efficiency improvements in "run" costs will continue. We plan to remain profitable and to continue to generate cash in the 2021/22 financial year, notwithstanding that we are targeting revenue growth to be at least matched by the rate of cost growth as we prioritise scaling our automated predictive products.

The Company can be found at https://system1group.com/

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) 596/2014 as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication of this announcement, this information is now considered to be in the public domain. 

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