System1 swings to profit in solid first-half

The AIM-traded firm said its gross profit on a management basis also saw substantial growth, reaching £11.7m, up 37%.

Adjusted operating costs stood at £9.8m, marking a 10% increase, while the company swung to an adjusted profit before tax of £1.9m from a loss of £0.4m a year earlier.

On a statutory basis, System1 reported operating costs of £11.1m, reflecting a 27% increase, while other operating income reached £0.3 million, up 47%.

Profit before tax for the period reached £0.9m, compared to a break-even result in the first six months of the 2023 financial year.

Its income tax expense totalled £0.3m, up 46%, resulting in a profit for the period of £0.6m, swinging from a loss of £0.2m year-on-year.

Diluted earnings per share stood at 4.9p, a significant improvement from the first-half loss of 1.7p per share last year.

Operationally, System1 noted a 44% growth in platform revenue, driven by ‘Predict Your’ and ‘Improve Your’, representing 82% of total revenue.

Revenue growth was seen in all regions, including the Americas.

The company launched new partnerships with Pinterest, Finecast, JCDecaux and Teads, contributing to robust growth in ad testing revenue.

Additionally, System1 increased its focus on non-television format ad testing with the launches of TYA Digital and TYA Audio.

During the period, System1 added 136 new platform clients - a significant increase from the first half of 2023, while it demonstrated improved retention of existing customers.

The company achieved a 17% reduction in the cost of sales due to platform and supply chain efficiencies, resulting in a gross profit margin increase to 87.8% from 81.5% a year earlier.

Its average headcount decreased by 6% to 143.

Regarding current trading and outlook, System1 reported a promising start to the second half and anticipated revenue exceeding the year's first six months.

It said its gross profit margin remained strong and was well above recent historic levels.

Despite challenges in some key markets and the broader media landscape, System1 aimed to continue its profitable growth trajectory by capturing market share from larger competitors with less predictive products.

“One year after our strategic review there are signs that the company’s fame-building activity and renewed focus on execution are working,” said chief executive officer James Gregory.

“We are helping even more of the world’s largest advertisers make confident creative decisions and won over 100 new clients in the first half, including a global top three advertiser, a leading global breakfast foods company, a leading European car manufacturer, a leading budget airline, a ‘big four’ UK supermarket, and a multinational consumer goods company.

“Platform revenue comprised 82% of total revenue in the half, ahead of our plan and well above last year’s level.”

At 1144 GMT, shares in System1 Group were up 20.34% at 210.6p.

Reporting by Josh White for Sharecast.com.