System1, the marketing services group, issues the following update on trading for the six months to end-September 2020. The Company will announce its interim results on 17 November 2020.
Overall, the first half of the current year (H1) saw a marked reduction in sales compared to the prior year, due partly to the impact of Covid-19 on the business of many of our clients. The downturn was particularly pronounced in the US, against a very strong H1 2019/20, while the UK and Asia Pacific produced double-digit revenue growth. Both Turnover and Gross Profit for the half year are expected to be some 25% below the comparable 2019/20 period.
The Company is reviewing its office footprint for lease impairment in view of the ongoing Covid-19 pandemic and new ways of working. This review may give rise to an impairment charge, but any such adjustment will be a non-cash charge and will be confirmed at the release of Interim Results.
Operating Costs were managed down as part of System1’s Covid-19 response, and the business took advantage of some government support schemes, notably in the US and the UK. System1 continued to invest in support of future growth in H1, particularly in product innovation and automation. H1 Operating Costs excluding any impairment charges were some 22% lower than in H1 2019/20.
Group Pre-tax Profits (excluding any impairment charges) are expected to be some £0.6m in H1, approximately £0.8m lower than in the comparable period.
System1’s financial position remains strong. Despite lower profits, period end net cash was £5.1m, compared with £4.1m at end-March 2020. Approximately half of the improvement in H1 was due to receipt of an R&D tax credit related to FY 2018-19, and a similar claim for FY 2019-20 is being prepared.
Given continued uncertainty over the medium- and longer-term impact of Covid-19, we are continuing to suspend financial guidance for the time being. No 2020/21 interim dividend will be paid (prior year 1.1p).