System1 data revenue improves in first half

25th Oct 2022 13:56

(Sharecast News) - System1 said in a trading update on Tuesday that its data revenue grew 38% in the first half to £6.2m, representing 59% of revenue - the highest absolute six-month revenue for its automated predictions, and the highest proportion of group revenue since launching in 2020.

The AIM-traded firm said continued growth in data was offset by a 46% decline in consultancy to £4.3m, from £7.9m.

As a result, total first-half revenue declined 15% on the comparable period last year to £10.5m, in line with management's expectations.

Gross profit fell 18% to £8.5m, with the reduction in margin due mainly to region and product mix.

The board said adjusted operating costs narrowed 1% to £9m, adding that it expected to report an adjusted pre-tax loss of £0.4m for the six months ended 30 September, compared to an adjusted pre-tax profit of £1.3m in the first six months of last year.

At statutory pre-tax profit level, the firm said it expected to break even in the first half, down £1.3m on the first half of last year.

Cash at period-end, net of borrowings, stood at £6.6m, compared to £8.7m at the end of March, with the outflow reflecting the adjusted pre-tax higher working capital and the repurchase of shares on market.

"The board is encouraged by the strong growth in 'test your' data products, which now represent almost 60% of group revenues in the first half, and grew 17% compared to the preceding half year," the board said in its statement.

"It is clear that the transition from bespoke research consultancy to platform-based 'test your' data is well underway, and the board expects the drag from declining bespoke research consultancy to reduce progressively."

On 9 November last year, System1 announced that it had filed a complaint for trademark infringement, unfair competition and deceptive trade practices at the United States District Court Southern District of New York against System1 LLC over its infringing use of the mark 'System1'.

"Earlier this month, the court rejected LLC's motion to dismiss the complaint, which means the case will proceed as planned," the directors updated.

"In the same week, we received positive news for the next stage in the legal case by successfully registering the mark 'System1' with the US Patent and Trademark Office for use in classes 35 and 38, matching the registrations already held in the UK, EU, and other territories."

Finally, the board announced on 31 August that it was conducting a review of its strategic options for growing the business and increasing shareholder value.

"The board also decided to postpone the previously planned tender offer and share buyback programme, with decisions on future returns of capital being considered as part of the overall strategic review.

"As previously announced, the board intends to update the market on its strategic review alongside the interim results announcement on 30 November."

At 1146 BST, shares in System1 Group were up 9.52% at 230p.

Reporting by Josh White at Sharecast.com.