System1 (SYS1): Unrecognised Growth Potential?

Filing Date 7th September 2021???

How does that compare to the filing date of the other TM’s?

2017, 2019

Cheers anon,

Seems slightly bizarre that they didn’t register SYSTEM1 earlier - presume it was an afterthought once they got wind of SYSTEM1 LLC?

Yes. Since 2017, System1 LLC had an application on the ‘System1’ trademark, which they either couldn’t get or allowed to lapse and abandoned in Apr19.

Presumably SYS1 sensibly thought it a good idea to apply this year, maybe after this dispute started up.

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I was surprised by today’s announcement that Stefan Barden is reverting to his advisory role and the founder is stepping back to CEO. Are there indications that it was “planned” as per RNS? May be I am cynical, but I suspect either personal differences with the founder or a philosophical clash (e.g. hard headed systematic/KPI driven manager and the marketeers). May be I have misread this, but I will be watching closely. I will try to go to next shareholder event to get more of a feel for the team.


Must admit I had to check whether the reversion was planned or not.

The latest RNS said:

System1 Group plc (AIM: SYS1) today announces that, as planned, Stefan Barden will step down as CEO and from the board of directors on 31 January and revert to his previous role as an adviser to the board of directors on strategy and technology.

The appointment RNS said (June 2020):

System1 Group plc (AIM: SYS1) today announces that it has appointed Stefan Barden to the board of directors of the Company as an executive director with immediate effect. From November 2018, Stefan has been an adviser to the board of directors on strategy and technology, and has recently taken on the executive role of chief operating officer to assist the Company through its next phase of development. He will return to the advisory role when this is complete, expected to be in around a year.

But this RNS said (March 2021):

System1 Group plc, the advertising effectiveness agency, (AIM: SYS1) announces that, in line with the continued evolution of the Company, John Kearon, previously Chief Executive Officer, has today assumed the title of ‘Founder and Executive President’ and Stefan Barden, previously Chief Operating Officer, the title of ‘Chief Executive Officer’.

Their internal responsibilities are unaffected, with John leading the Company direction, product development and external facing parts of the business, and Stefan leading the Company’s organisation, technical development and operational parts of the business. No board changes are expected to arise as a result of this development. Stefan will remain an executive director rather than reverting to the purely advisory role indicated last year.

Not sure what to make of this. Mr Barden was set to have a year-long stint as a board exec, then became CEO and a permanent executive, but now has decided to return to the advisory role.

I get the impression Mr Barden was required to push through some tough changes, so had been appointed a board exec. I suppose the bull case from this latest RNS is the hard transitional work has now been completed and, nine months after saying Mr Barden would remain an exec, the company has transitioned so well that actually Mr Barden can return to being an advisor.

I don’t think a falling out has occurred. John Kearon spoke well of Mr Barden in casual AGM chat the other year, and I think the two knew each other before Mr Barden became an advisor. Also, Mr Barden has acquired a fair number of SYS1 shares with his own money and therefore appears committed to the cause.


Maynard, thanks. It seems I was being a bit over suspicious and I think you’re right that if there had been a fall out he would not stay as a consultant. One to keep an eye on. MTIOC

Agree with Maynard, seems to have been brought in to do some heavy lifting during the transition.

Even his Sys1 bio suggests he doesn’t really want the day to day slog of heading up a company.

Date revenue is still growing. A Q3 update published today:

System1, the marketing decision-making platform, intends to issue quarterly updates for Q1 and Q3 of each year based on unaudited numbers. These updates are intended to keep investors informed of the Company’s performance between the interim and final trading updates and results announcements. System1 today issues the following update on trading for the quarter ended December 2021 (Q3).

Revenue in Q3 rose 8% on the comparable period last year to £6.5m, and Data products represented 43% of the quarter’s revenue.

Year-to-date revenue to the end of Q3 was 17% higher than the prior year at £18.9m, and

Data revenue represented 39% of the year-to-date total (H1: 36%).

Period-end cash, net of borrowings, was £8.1m, compared with £6.5m at end-March 2021.

Profitability was in line with management’s expectations and reflected an increase in expenditure on people and platform as highlighted in the interim results announcement.

Data revenue at 43% gives £2.8m for this Q3, versus £2.6m for Q2. So a useful increase at the more attractive division as the business shifts away from old-style consultancy income. Consultancy revenue, which had dropped to £3.2m for Q2, rebounded to £3.7m.

SYS1 Q3 2022 chart

Net cash for the nine months has gained £1.6m, so annualised could be £2.1m. But H1 cash flow was bolstered by tax credits of £0.4m. So a bit tricky trying to establish an underlying cash flow number and what Q3/H2 profitability could be. The words “reflected an increase in expenditure on people and platform” may be suggesting more cash is being spent on expansion than had been anticipated. An in-depth look at SYS1’s H1 results and this Q3 update is the next job for my blog.



Share price down 14% first thing, now down 9.2%.

Trading statement ‘in line’ so would not warrant such a fall. Main reason appears to be a broker downgrade to ‘hold’ from Canaccord Genuity.

I like the company’s intention to provide quarterly updates in future.


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The AdRatings intangible asset was written off during the 2020 year-end, because at the time there was not enough revenue to support the balance sheet asset value:


This certainly explains part of the drop in EBIT during 2020, from £2.1m to £0.4m, due to this £921k write-off.

Subsequently, the AdRatings development cost is now being expensed through the P&L, as a change of intangible asset policy.

But, this asks the question how much is being spent on AdRatings development in 2021 and the current year?

It would be useful to know this, to be able to adjust Profit and ROCE upwards, for what I consider to be mostly capital expenses.

Also, it would help to form a view on how invested in the data side of the business is, and how much is this growing (or reducing) annually, and to be able to calculate the non-development/operating margin of the data side of the business.

Revenue and Gross Profit (their definition being Revenue less external costs) are disclosed in the annual accounts, but not profit by operating segment.

Director incentives:

Director share awards are based on Gross Profit, so effectively incentivising the maximisation of revenue and minimising of external costs.

Possibly SYS1 is intentionally being made ready for a trade sale, whereby someone like S4C would purchase on a multiple of revenue and then reduce the ‘below the gross profit line’ costs post acquisition/merger? SYS1 would need to get revenue growing to get a decent valuation.

i.e. The two executive directors may be at an age whereby they are looking to exit in the next 5 to 10 years? (Having said that, Martin Sorrell is still going at 78 !)




Although I liked their intention I wasn’t expecting today’s bombshell profit warning only 2 weeks later!

Total revenues in the final quarter ending 31 March 2022 are now expected to be over £1m short of management’s previous expectations. This is due to a sudden and unanticipated reduction in the forecast for bespoke consultancy project sales in the US.

RNS states:

’…total revenues in the final quarter ending 31 March 2022 are now expected to be over £1m short of management’s previous expectations. This is due to a sudden and unanticipated reduction in the forecast for bespoke consultancy project sales in the US.

Management is taking rapid action to address the consultancy sales performance in the US. As a consequence of the lower consultancy revenues, we now expect profit before tax for the final quarter and the year as a whole to be about £1m below the current market expectations.'

Whilst the transition to automated data products is progressing well this is nevertheless a big hit with the £1m shortfall dropping straight to the bottom line in Q4 and for the full year.

There is no comment on how long this may impact future revenues. This could very very painful in the short term unless automated data product sales are ramped up much quicker than the current rate.

Share price is likely to take a hammering at opening today.


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Hi Snazzy

Oh dear. Not ideal news. Shares down to 230p giving a £30m market cap. RNS says net cash is £9m, so almost a third of the company’s value. Net cash increased by £0.9m during January.

RNS also says “Management is taking rapid action to address the consultancy sales performance in the US”, which I would like to think means keeping losses to a minimum. SYS1 did very well during the early stages of the pandemic to turn losses from calendar Q2 2020 into profit for the follow-up Q3. Upshot should be SYS1 won’t have to dip into the £9m cash reserves to see this episode through. Although management might need Stefan B to come back into an executive role to sort things out!

The old-style Consultancy revenue has never been that predictable, which is why the company is shifting to automated products. Consultancy revenue for the last four quarters was £5.2m, £4.7m, £3.2m and £3.7m, so trending lower anyway. But as I noted earlier in this topic, I guess the crossover to Data will not always balance out.

Completely ignoring Consultancy and concentrating only on Data… Data revenue was £2.8m in the last quarter and therefore running at £11m annualised. Could Data income one day reach £20m? If it can and achieve a 15% margin and pay tax at 25%, then we have earnings of £2.2m. That places the current £21m enterprise value at 10x. These very early sums do not suggest to me now is the time to be selling.



hi Maynard

That thought had occured to me. In hindsight it appears SB’s earlier than planned removal from the front line was a bit hasty. Re-instating him for the duration originally planned would be a positive move.

Agree. The transition to data has been the key part of the investment thesis and remains intact. So long as data remains on an upward trajectory the thesis remains intact. We will see over future quarterly trading updates the pace and success of this strategy.



These comments from you both hit the nail on the head for me. The reason that I own System1 is due to the opportunity associated with their digital transformation. Arguably it was common knowledge that the traditional consultancy is in decline and the move to the digital offering was a proactive move by management to address this. I would only reconsider my position at this stage if the growth from the digital products had stalled or declined.

That said, I do find some of the language used in today’s RNS disappointing. Claiming that the forecast reduction is due to “a sudden and unanticipated reduction in the forecast for bespoke consultancy project sales in the US” raises some concerns for me. Either the forecasting isn’t accurate and/or management have not being paying sufficient attention to how the business is performing in the US. Regardless of which one it is, management should be better at anticipating this rather than having to move into damage limitation mode. This might be unfair, but perhaps the recent executive changes and focus on share buy backs (which seems designed to ensure that management hit their LTIP targets) have taken attention away from business as usual?


Hi Paul,

I think today’s upset is par for the course with SYS1’s traditional Consultancy operation. Clients can seemingly drop prospective projects with little notice. Loads of past RNSs have cited “limited visibility” or similar. A few examples:

February 2020:

After H1 single-digit growth, followed by modest further progress in Q3, trading in Q4 to date has been disappointing, due in the main to the ongoing transition of sales talent, and subsequent disruption and decline in adhoc revenue from smaller clients. Given the limited visibility in some areas, it is difficult to predict the full year outturn, but the Board believes Gross Profit will be slightly down compared to the prior year.

January 2018:

Q3 trading continued to be worse than anticipated and, subject to its normal lack of revenue visibility, the Company now anticipates Gross Profit for the year to 31 March 2018 will be around 20% less than the prior year.

October 2017:

We remain cautious about our prospects over the remainder of the financial year due to our usual lack of revenue visibility.

August 2017:

The slower than expected start to our financial year which we noted at the time of the announcement of our 2016/17 results on 15 June 2017 has continued since then, and we now expect H1 Gross Profit (our main top line performance indicator) to be 6-11% lower than prior year. This is mainly due to non-recurrence of large one-off Innovation projects as a result of some significant client spending deferrals and a more competitive market, although there have been some more encouraging signs recently.

July 2015:

The Company generates the majority of its profit in the second half, and whilst revenue visibility remains typically limited the Board believes the Company is in a position to meet profit expectations for the full year.

July 2014:

As ever, revenue visibility is limited as we move into the second half of the year, which is traditionally when the bulk of our profit is generated.

March 2013:

After several years of uninterrupted financial success, 2012 was a disappointing year. James Geddes’ CFO commentary addresses the reasons in some detail but there’s one factor that accounts for the majority of the disappointment. Every year, some clients spend unused budget in November and December, but in 2012 many big companies decided instead to cut back, and this had a material effect on our profits. As a result, we reduced costs and we’ll be less reliant on clients releasing spare budgets at the end of the year going forward.

The LTIP requires revenue to reach at least £45m before the awards come good, so the buyback won’t help the LTIP on that front.

I think the shift to Data perhaps has taken attention away from Consultancy. After all, management has prioritised Data as the predominant group strategy so if you are a Consultancy employee you may feel like a bit second-class at present. And that may be reflected by today’s news. I note today’s RNS said "Automated Data products in the US region, and overall, continue to perform well", so Data is working in the States (but just not Consultancy!).

Maybe this development will prompt SYS1 to accelerate its transition to Data and wind down Consultancy sooner than expected.



Thanks Maynard, all valid points and given how the share price has begun to rebound, I suspect cooler heads in the market have also come to much the same conclusion.

Saw the headline at hoped it covered SYS1…

…and it did.

Useful to know a former “senior figure” within Cadbury’s in-house marketing team – and who worked on that famous drumming gorilla advert – now works for SYS1 as director of marketing and partnerships. The ad was made, but not broadcast for nine months until a SYS1 test showed a positive result.

Reference to the competition, too:

UK firm, Kantar, is another firm working on these analytics. It’s online testing system also focuses on a person’s emotional response to being shown an advert. One way it does this is by connecting to a tester’s laptop, or webcam, then using facial-mapping software to monitor their reactions.


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Highlighting a new geography (Brazil) for the data platform recently mentioned by Maynard

SYS1 invited me the other week to try the Test Your Ad (TYA) free trial.

I think anyone can sign up. The online form asks for your contact number and employer, but I left them blank and still got through. You have to nominate an industry, which I did not know at the time would limit your TYA access to that industry. I chose Other Financial Services and I was left with bank adverts.

But the trial gives free availability to various Christmas adverts, various sport adverts (for ideas for the forthcoming World Cup) and various general adverts that have done well (and not so well) on the TYA system. The trial provides a good idea of how TYA works. You play the ad and the viewer response charts on the right tell you when the ad starts to perform (or not). I suspect marketing people could spend hours on this, trying to tweak adverts to obtain better scores before broadcast.

Anyway, a few screenshots.

The top Christmas 2021 ads:

Including Aldi…

…and Coke:

A sector comparison:

Note how Lloyds Bank is the top-rated advertiser despite spending less than the other three.

A deeper sector comparison:

Adverts from the same company can be compared:

And you can upload your own ads through drag and drop:

You will need to buy credits first though:

The general ads contain some classics from the past:

And also includes political ads…

…as well as ads that sponsor the weather (with a surprisingly good score!):


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