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System1 Group shares drop as it warns on first half profits as slower than expected start to the year has continued

Last updated: 08:40 18 Aug 2017 BST, First published: 08:00 18 Aug 2017 BST

Marketing
But he will add: “Notwithstanding this slow start and our lack of revenue visibility, we expect Gross Profit to move back to growth in H2”

System1 Group PLC (LON:SYS1) lost a fifth of its value in early trading after the behavioural marketing services group - formerly known as Brainjuicer - warned on first half profits as a slower than expected start to the year has continued and an increase in costs.

At 8.35am, System1 shares topped the fallers list for the London market, down 22.2%, or 185p to 647.5p.

In a statement to be delivered at its Annual General Meeting this morning, the AIM-listed firm’s chairman Ken Ford will say: "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.”

READ: System1 proposes special dividend of 26p

He will add: “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.” 

But, the chairman will continue: “Notwithstanding this slow start and our lack of revenue visibility, we expect Gross Profit to move back to growth in H2.”

He will also say: “ We expect that H1 2017/18 costs will be some 15% higher than last year.  This reflects continued investment in senior hires in the US, which we referred to in our full year results announcement, to support future growth in both our Research and new Advertising Agency businesses. 

“The H1 cost increase also includes one-off severance costs which will result in savings of around £0.5m per annum in H2 and beyond.  Over the financial year as a whole, costs are currently expected to grow by around 10%”.

Ford will add that, as of now, the group anticipates first half pre-tax profit to be a little over break-even, against £2.8mln a year earlier,  and a decline in full year pre-tax profit of approximately 10%-15% from the £6.3mln achieved last year.

The group said it will provide an update in early October, and a more detailed report  with its first half results on 31 October 2017.

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