Annual Report and Accounts
for the year ended 31 March 2024
Maintaining
Momentum
Index
Highlights
1
Strategic Report
2
Group Overview
3
Chairman’s Statement
4
CEO’s Statement
5
Financial Review
13
Principal Risks and Uncertainties
16
Environmental and Social Report
19
Governance & Group Directors’ Report
26
Group Directors’ Report
27
Statement of Directors’ Responsibilities
30
Corporate Governance
31
The Board
37
Audit Committee Report
38
Remuneration Committee Report
40
Independent Auditor’s Report to the Members of
System1 Group PLC
44
Consolidated Income Statement
54
Consolidated Statement of Comprehensive Income
55
Consolidated Balance Sheet
56
Consolidated Statement of Cash Flows
57
Consolidated Statement of Changes in Equity
58
Notes to the Consolidated Financial Statements
59
Company Balance Sheet
83
Company Statement of Changes in Equity
84
Notes to the Company Financial Statements
85
Company Information
94
’’
‘‘
Spending thousands on pre-testing our creative
to make the millions spent on media work harder
pays for itself many times over.
Ben Case
Managing Director, Consumer Strategy
Sky
1
System1 Group PLC Annual Report and Accounts 2024
1
2024
2023*
(“FY24”)
(“FY23”)
Change**
£m
£m
%
*Restated
Results for the year ending 31 March
Platform Revenue (“Predict & Improve” ***)
24.8
17.4
43%
Other Revenue (Bespoke consultancy)
5.2
6.0
-13%
Total Revenue
30.0
23.4
28%
Gross profit
26.1
19.7
32%
Operating costs
(23.4)
(18.9)
24%
Other operating income
0.4
-
nm
Finance expense
-
(0.1)
-108%
Profit before tax
3.1
0.7
333%
Tax charge
(1.1)
(0.3)
241%
Profit for the financial year
2.0
0.4
403%
All figures in the Highlights are presented in millions rounded to one decimal place unless specified otherwise. Percentage movements are
calculated based on the numbers reported in the financial statements and accompanying notes.
* FY23 has been restated to bring it in line with IFRS 16 rules relating to sublease income on our old New York office. The restatement does
not affect Profit before Taxation, but reduces FY23 Adjusted EBITDA by £0.2m. See note 3 for more information.
** Year-on-year percentage change figures are based on unrounded numbers.
*** Data and data-led consultancy
2024
2023*
Change**
(“FY24”)
(“FY23”)
%
*Restated
Key performance indicators
Platform revenue growth
43%
40%
3%
Number of clients
428
297
44%
Gross profit % Revenue
87%
84%
3%
Adjusted EBITDA £m1
4.4
1.6*
175%
Adjusted EBITDA % Revenue
15%
7%
8%
Rule of 402
57%
47%
10%
Free Cash Flow (FCF) £m3
4.0
(3.1)
7.1
FCF % Adjusted EBITDA
92%
(196%)
288%
Net Cash £m
9.6
5.7
3.9
Diluted earnings per share**
16.0p
3.2p
404%
Dividend per share
5.0p
-
nm
1. profit before taxation + share-based payments + interest, depreciation and amortisation
2. Platform Revenue growth %+ Adjusted Group EBITDA % Group Revenue
3. Cash flow after interest and before debt raising/reduction, buybacks/dividends
•
Momentum maintained – second consecutive year
of 40%+ Platform revenue growth
•
44% increase in number of clients, with 260 wins in
the year
•
Net Revenue Retention Rate of 100% on platform
revenue
•
Significant double-digit revenue growth in US, UK
and Europe
•
Gross profit margin improves by 2.8 points to 87%
•
Adjusted EBITDA % revenue margin rises by
8 points to 15%
•
£4m free cash flow; £9.6m year-end net cash
•
Profit before Taxation >4x higher, Profit after
Taxation >5x higher than in FY23
•
Diluted EPS 16.0p per share (FY23: 3.2p)
•
Proposed Dividend of 5p per share, equating to
£0.6m. Record date 27 September, payment
18 October.
Highlights
1
2024
2023*
(“FY24”)
(“FY23”)
Change**
£m
£m
%
*Restated
Results for the year ending 31 March
Platform Revenue (“Predict & Improve” ***)
24.8
17.4
43%
Other Revenue (Bespoke consultancy)
5.2
6.0
-13%
Total Revenue
30.0
23.4
28%
Gross profit
26.1
19.7
32%
Operating costs
(23.4)
(18.9)
24%
Other operating income
0.4
-
nm
Finance expense
-
(0.1)
-108%
Profit before tax
3.1
0.7
333%
Tax charge
(1.1)
(0.3)
241%
Profit for the financial year
2.0
0.4
403%
All figures in the Highlights are presented in millions rounded to one decimal place unless specified otherwise. Percentage movements are
calculated based on the numbers reported in the financial statements and accompanying notes.
* FY23 has been restated to bring it in line with IFRS 16 rules relating to sublease income on our old New York office. The restatement does
not affect Profit before Taxation, but reduces FY23 Adjusted EBITDA by £0.2m. See note 3 for more information.
** Year-on-year percentage change figures are based on unrounded numbers.
*** Data and data-led consultancy
2024
2023*
Change**
(“FY24”)
(“FY23”)
%
*Restated
Key performance indicators
Platform revenue growth
43%
40%
3%
Number of clients
428
297
44%
Gross profit % Revenue
87%
84%
3%
Adjusted EBITDA £m1
4.4
1.6*
175%
Adjusted EBITDA % Revenue
15%
7%
8%
Rule of 402
57%
47%
10%
Free Cash Flow (FCF) £m3
4.0
(3.1)
7.1
FCF % Adjusted EBITDA
92%
(196%)
288%
Net Cash £m
9.6
5.7
3.9
Diluted earnings per share**
16.0p
3.2p
404%
Dividend per share
5.0p
-
nm
1. profit before taxation + share-based payments + interest, depreciation and amortisation
2. Platform Revenue growth %+ Adjusted Group EBITDA % Group Revenue
3. Cash flow after interest and before debt raising/reduction, buybacks/dividends
•
Momentum maintained – second consecutive year
of 40%+ Platform revenue growth
•
44% increase in number of clients, with 260 wins in
the year
•
Net Revenue Retention Rate of 100% on platform
revenue
•
Significant double-digit revenue growth in US, UK
and Europe
•
Gross profit margin improves by 2.8 points to 87%
•
Adjusted EBITDA % revenue margin rises by
8 points to 15%
•
£4m free cash flow; £9.6m year-end net cash
•
Profit before Taxation >4x higher, Profit after
Taxation >5x higher than in FY23
•
Diluted EPS 16.0p per share (FY23: 3.2p)
•
Proposed Dividend of 5p per share, equating to
£0.6m. Record date 27 September, payment
18 October.
Highlights
Strategic Report
Where we operate
How we operate
System1 Group PLC Annual Report and Accounts 2024
Group Overview – System1 on a page
Who we are and why we exist
System1 is a marketing decision-making platform
business. Our target customers are the world’s
largest advertisers. These businesses under
stand that creativity is the most powerful tool for
growth within their control. System1 helps them
make confident creative decisions that lead to
transformational business results.
What we do
System1 predicts and improves marketing effec
tiveness. Our advertising and idea tests measure
emotion to give our customers the most accurate
predictions of the business impact of creativity.
We ‘predict’ (provide research results) and work
with our customers to ‘improve’ (provide insight
and consultancy on those results) advertising
effectiveness, innovation effectiveness and brand
effectiveness. Our unique selling point is pre
dictiveness, translating emotion into business
results.
Our products
We run tests in 81 markets
globally.
Office locations include
New York, Miami, Sao Paulo,
Los Angeles, London,
Paris, Hamburg, Rotterdam,
Singapore, and Sydney.
Our Platform offers auto
mated fast-turnaround Data
and Data-led Consultancy
products for ad testing,
innovation testing and
brand effectiveness track
ing. We can supplement
the platform proposition
with bespoke consultancy
where this is required by
our customers. Our largest
customers buy both Data
and Consultancy.
We are guided by our
growth model “flywheel”.
We meet our customers’
needs with leading proposi
tions delivered efficiently
via the platform. We build
awareness of our proposi
tions through fame-building
and partnerships which
bring customer interest
that we seek to convert
and scale up. Growth in our
scalable model produces
improved margins which we
then seek to reinvest in our
people, our shareholders,
and back into the busi
ness growth flywheel. The
growth model is under
pinned by a robust support
structure and performance
culture.
3
403%
Increase in earnings
FY24
System1 Group PLC Annual Report and Accounts 2024
4
My first full year as your
chairman has proved both
satisfying for me and
rewarding for all share
holders. Led expertly
by CEO James Gregory,
the business grew rev
enue and profit before tax
by 28% and 333% respectively and generated
£4m free cashflow. Earnings for the year were up
403% to £2.0m, 16.0 pence per share. We began
the financial year with
a market capitalisa
tion of £20 million
and ended it valued
at over £50 million.
In light of this much-
improved
perfor
mance and the Board’s confidence in the future,
we are recommending a dividend for the year of
5.0 pence per share.
The
CEO’s
Statement
comprehensively
reviews progress towards our strategic priorities.
Highlights in the past year include
• 260 new clients acquired
• Worked with 5 of the top 10 advertisers in the
US and 7 out of 10 in the UK
• New partnerships formed with TikTok, an
American commercial broadcast television
and radio network, and Effie to name but three
• New customer-focused products brought to
market, notably Test Your Ad Pro+, have proved
our scalable customisation model
During the year we reintroduced a short-term
incentive plan (STIP) for members of the execu
tive committee and our three executive directors.
We did this because in spite of the impressive
turnaround in financial performance, the Long-
Term Incentive Plan will likely not meet its low
est threshold even if revenue growth in the new
financial year matches an exceptional FY24. The
retention and reward of our key people is a mis
sion critical priority. Going forward we favour a
blend of short- and longer-term incentives for the
most senior executives and will provide further
detail on this in 2025.
As a board we listened carefully to the feed
back from all stakeholders in the previous year
and as a result have broadened our investor
relations activity, in particular improving smaller
shareholders’ access to management via virtual
meetings.
Finally on behalf of the board I would like to
recognise the immense effort that our 150 col
leagues in the business make every day to meet
and exceed the needs of our customers. Their
efforts, guided by our new strategy, are beginning
to bear fruit.
Rupert Howell
Chairman
Chairman’s Statement
Earnings for the year were up 403% to £2.0m,
16.0 pence per share. We began the financial year with a
market capitalisation of £20 million and ended it valued
at over £50 million.’’
‘‘
82%
Platform revenue
as a percent of total
System1 Group PLC Annual Report and Accounts 2024
5
Maintaining
momentum
FY24 was our first full
year of execution post
the
2022
Strategic
Review
and
has
exceeded expectations,
although I believe we are just
scratching at the surface of the opportunity fac
ing us. System1 delivered £30m of Revenue, up
28% year on year, growing quarter on prior quar
ter throughout the year. This was underpinned by
43% growth in Platform Revenue (our strategic
platform and products) and Profit before Taxation
up by 333% on the previous year.
By putting the client at the heart of all we do,
we’ve strongly grown our brand and client base,
seeing 260 new client wins and almost doubling
our client base. We are having particular success
in the US where we work with the 5 of the top 10
US Advertisers (as ranked by Visual Capitalist),
building on our already strong UK presence where
we work with 7 of the top 10 UK Advertisers (as
ranked by Statista). New client platform revenue
has increased by 121% year on year to £7.5m, and
platform revenue reached 82% of total revenue,
providing a solid base for future growth.
We have increased our fame with global
partnerships with TikTok, an American com
mercial broadcast television and radio network,
Effie, Pinterest, Radiocentre, GroupM Nexus, JC
Decaux, Roku, Aardman, OMD and Fuse along
side existing partnerships with ITV and LinkedIn.
The quality of these partnerships speaks to the
strength of our platform and products. We have
expanded our product base, providing the ability
to test across the whole marketing campaign (TV,
Digital, Audio, Out of Home). Our FY25 revamped
Innovation product launch to meet our custom
ers’ needs provides a focussed growth opportu
nity in this channel.
We have established a true performance cul
ture, one where all members of the business are
motivated to deliver top class outcomes for our
clients, recently being awarded the accolade of
“The Sunday Times Best Place to Work” in the UK.
In February 2024, we strengthened our Executive
Team with the addition of Mike Perlman, our new
Chief Commercial Officer, running the global
sales teams and based in the US.
In the coming year
we will step up invest
ment in attracting,
winning and retain
ing
customers
to
continue our growth
trajectory. We believe
we have significant headroom to grow the base of
the business we have today… as well as the mas
sive opportunity to win in the US, where we have
the chance to create an Innovation offering that
is as great as our Advertising offering and to con
tinue to win with the world's largest advertisers.
I’m so proud of our staff, who have delivered
a great year and look forward to seeing contin
ued growth in the coming year. Thank you to the
Board for their wise counsel and strategic guid
ance, to the Executive team for being extraordi
nary leaders and to John Kearon for his counsel
and support during my first year as CEO.
CEO’s Statement
Our success last year was underpinned by 260 new
client wins and our scalable growth model. In the coming year
we will step up investment in attracting, winning and retaining
customers in order to continue our growth trajectory. ’’
‘‘
System1 Group PLC Annual Report and Accounts 2024
Progress towards our goals &
The Flywheel
We have made strong progress and have grown
the business by focussing obsessively on deliver
ing the plan encapsulated in our flywheel. The fly
wheel concept builds on the four strategic goals
we set out 6 years ago, taking on board the learn
ings from the 2022 Strategic Review.
1
We help the world’s largest advertisers
make confident creative decisions that lead
to transformational business results
Putting the customer at the heart of all we do has
helped transform our business. We have a clear
target market – the world’s largest advertisers. We
know these clients have the capacity and capabil
ity to invest in pre-testing of advertising and inno
vation as well invest in brand tracking.
We know that our clients will be judged on the
success of their advertising, their innovation and
their brand growth. Data from over 5,000 IPA
case studies shows that the biggest influence
within any of these that a brand can control is cre
ative: this has a x12 impact on the profit multiplier.
But we also know from Clayton Christensen of
Harvard Business School that 51% of advertising
has no impact on market share growth and that
95% of new product launches fail, as brands do
not harness the power of creativity. The accurate
predictiveness of our tests on our platform and
the expert guidance provided by our people give
our clients the confidence that their products and
services will be a success when launched in the
market.
And most importantly, our clients know that
once launched, these adverts and innovations
will drive real business results for them: growth of
their brand, revenue and profit.
6
CEO’s Statement continued
How to Win: The Flywheel
System1 Group PLC Annual Report and Accounts 2024
7
to align the proposition better with the innovation
process in the world’s biggest companies. The
new TYA and TYI features build on our fully auto
mated platform, where we delight our custom
ers and create competitive advantage with zero
manual intervention and therefore, high levels of
scalability.
We have been able to accelerate progress in
this area with our new executive team structure
working smoothly to translate our unique IP into
predictions and improvements for our customers:
Robyn Di Cesare as Chief Product Officer part
nering with Orlando Wood, our Chief Innovation
Officer to set out the vision and Mark Beard, our
Chief Information Officer speedily delivering the
IT development.
Test Your Ad has expanded to cover all media
types from early-stage scripts to finished films,
to ensure we have the fastest, most predictive,
actionable products that meet our customers’
needs. Alongside the TV testing, we now offer
TYA for Digital, Audio, Out of Home and Print test
ing, allowing our customers to test full campaigns
across media types.
2
We’ve created a platform and proposition …
to help the world’s largest advertisers make
confident creative decisions
We achieve this by measuring what matters most:
emotion, that gets to your "System 1" response.
Our IP and thought leadership have built on the
work by Daniel Kahneman in “Thinking Fast and
Slow” that sets out how System 1 thinking is fast,
instinctive, emotional and drives behaviours. Our
clients are clear that our ability to capture, mea
sure and interpret emotional responses to cre
ative content is the number one reason they buy
from us, and many say that we do what no-one
else in the market can do. Our platform, products
and guidance are built on measuring emotion and
translating that data into actionable insights that
will deliver real business results.
We have focussed on our platform and prod
uct development, with expansion of the Test Your
Ad product suite across FY24 and a relaunch of
the Test Your Innovation product suite in early
FY25. The relaunch of Test Your Innovation seeks
System1 Group PLC Annual Report and Accounts 2024
CEO’s Statement continued
8
the launch in July 2023 this brings in incremental
revenue with a higher price point than the Test
Your Ad Pro product and has quickly become one
of the top selling products.
ing works and recommend improvements for our
clients. This has been very well received, with
clients regularly siting 'highly actionable' in their
feedback.
Test Your Ad Pro+ has been a game-changer
as we’ve built the ability to deliver customer and
project specific customisation in a scalable man
ner, through the automated platform. Following
We also refreshed data-led consultancy, to
incorporate our latest thought leadership, pro
viding an updated framework on how advertis
System1 Group PLC Annual Report and Accounts 2024
9
the short and long term and enable quick decision
making. In the article he describes System1 as
having “come to dominate the field of pre-testing
in a remarkable short period of time”. Marketing
Professor Peter Field followed this with evidence
from the IPA database showing that those cam
paigns that pre-tested did better than those that
didn’t and credits System1 as one of the reasons
for that difference. https://www.marketingweek.
com/ritson-pre-testing-no-brainer/
3
We’re famous for predictions and
improvements … that help the world’s
largest advertisers make confident
creative decisions
We have step-changed the volume and quality of
System1 fame creation in FY24. We have worked
in partnership with global industry-leading com
panies, which we promote through a wide range
of channels, focussed primarily on the US and
UK and secondarily into our other key markets in
Brazil, Germany, France, Asia and Australia. The
clients, ensuring our products neatly follow a stan
dard product development cycle. This exciting
development will help accelerate our growth in
the Innovation space in the upcoming year.
With our customer-centric focus, in April 2024
we have launched a new Test Your Innovation prod
uct suite to replace Test Your Idea. This repositions
the previous version in a way that better suits our
We also continued our investment in growing
our world-leading Test Your Ad database to over
100,000 ads, where we test every ad in the US
and UK on a daily basis, creating what we believe
to be the world’s largest database of validated ad-
effectiveness data and providing our customers
with unique insight into the performance of them
and their competitors.
Influential Marketing Professor Mark Ritson
published an article in Marketing week, showcas
ing how SKY use System1 pre-testing capability
early in the process to predict business results in
System1 Group PLC Annual Report and Accounts 2024
result of this fame building activity is an increase
by over 40% of leads generated in the US and UK
vs FY23.
PR – We increasingly had our voice heard on
important industry topics like the ‘Long and Short
of It’ and ‘Wear Out’, and around big ad occasions
like the Super Bowl, Christmas and major new ad
campaigns. Regular features in leading publica
tions like Marketing Week, The Drum, Campaign,
Ad Age, Adweek and more led to a year on year
69% increase in global coverage. This resulted in
System1’s share of voice increasing 87.5% in the
US and 51% in the UK.
Events – System1 had a big pink presence at lead
ing industry events, some of which attract 10k
plus attendees. These include ANA’s Masters of
Marketing, Brand Innovator’s Marketing Innova
tion Summits, Festival of Marketing and MAD//
Fest.
Partnerships – Partnerships help drive Fame,
generate co-branded thought leadership to be
shared with the industry, and enable introductions
to partners’ clients. New partnerships solidified in
FY24 include Pinterest, resulting in research on
digital ads; Radiocentre, resulting in the publica
tion of the Listen Up!; and Aardman. New partner
ships with TikTok and Effie will be highlighted with
research coming in FY25.
“Uncensored CMO” Podcast – FY24 has a large
focus in the US with an impressive roster of
guests including Professor Scott Galloway, Liq
uid Death’s Mike Cessario, former Netflix CMO
Bozoma Saint-John and Michelob ULTRA’s Ricardo
Marques, as well as Amazon Chief Creative Offi
cer Jo Shoesmith, Just Eat’s Susan O’Brien and
GUT’s Anselmo Ramos. Uncensored CMO now
has listeners in 150 markets and is the #1 market
ing podcast in the UK and top 20 in the US.
Ad of the Week – Celebrates the best and most
effective creative content from around the world,
which engages brands and agencies and further
amplifies System1’s Fame. In FY24 subscribers
increased by 20%.
Thought Leadership – System1 continued to
expand its thought leadership around major
advertising moments like the Super Bowl and
Christmas, timely topics like sustainability (The
Greenprint and The Greenprint USA) and sports
sponsorship (The Sport Dividend), and evergreen
areas of focus like advertising effectiveness
(Timeless Importance of the Show, Ritson on
Advertising), media best practices (Listen Up!),
and category insights for charity, auto, financial
services and other sectors.
4
We make it easy for System1 to convert the
world’s largest advertisers at the right time
FY24 was a record year for new client wins, beat
ing the previous record set in FY23, based on our
platform automation and increased fame build
ing, amplified through global partnerships. Our
go-to-market strategy has seen us win well in spe
cific sectors, such as Grocery Retailers, Big Tech
and Pharmaceuticals.
We won 260 new clients, delivering £8.3m of
new revenues (of which £7.5m on platform), with
33% in the US and 41% in the UK. As always, we
are not permitted to name many of our clients,
and new wins in the period included: Pfizer, M&S,
Tesco, easyJet, Toyota, Muller, B&Q, and Just Eat.
We saw 90% of new revenues coming from
our strategic platform suite of predictions and
improvements. The power of our predict and
improve offer was shown through 67% of new
revenues coming from customers buying both
these offerings. We are also seeing the impor
tance of retaining a small amount of bespoke con
sultancy to allow us to win with the world’s largest
advertisers.
5
We scale up and are embedded throughout
the world’s largest advertisers
We saw excellent levels of revenue growth, with
total revenues up 28% and platform revenues up
by 43%.
We have started to make good progress in max
imising revenue opportunities within our existing
client base but have opportunity to make fur
ther inroads in this space. We had a Net Revenue
Retention Rate on total platform revenue of 100%.
Concentration in our top 10 and top 20 clients
was consistent year on year. Our top 10 clients
made up 30% of revenue and our top 20 clients
45% of revenue. All of our top 20 clients in FY24
bought platform products with 78% of spend
from the top 20 clients being on data and data-
10
CEO’s Statement continued
Lorem ipsum
Data
16%
Data-led
consultancy
1%
Bespoke
consultancy
4%
4%
42%
29%
4%
Total Revenue = £30.0m
System1 Group PLC Annual Report and Accounts 2024
led consultancy. No one client in FY24 was larger
than 5% of total company revenue.
We continue to see the majority of revenue
coming from the world's largest advertisers who
follow our model of test and improve, buying
data and data-led consultancy. In FY24 75% of
total revenue came from the 40% of the clients
by number that purchased both data and consul
tancy. Conversely, the 51% of clients by number
that purchased only data represented just 16% of
Group revenue.
We are starting to focus on cross-selling our
comms, innovation and brand tracking product
lines. In FY24, 2% of our clients bought all 3 prod
uct lines, but this contributed to 13% of total rev
enue. 13% of our clients bought more than one
product line, contributing to 45% of total reve
nues for the year.
We now work with 5 of the top 10 US advertis
ers and 7 of the top 10 UK advertisers.
11
6
We reinvest the results of higher volumes
and margins from helping the world’s largest
advertisers make confident creative
decisions
We grew profit before tax by 333% in FY24 and
gross profit margin growth was exceptional at +3
points to 87% and ahead of our 85% long-term
benchmark.
While FY24 was a prudent year of investment,
we plan to invest in FY25 across our people, our
platform and proposition and also reward our
shareholders.
People – In the second half of FY23 we changed
the way that most people in the business are
rewarded by placing greater emphasis on vari
able pay linked to growth in the Group's gross
profit. FY24 was therefore the first full year of
this approach which we believe is working well.
Whereas only a few colleagues received a cost-
of-living increase to their salary, variable pay
across the Group rose by £2.8m year-on-year as
a result of significantly higher sales volumes and
improved profit margins.
Platform and proposition – In FY24, we main
tained our investment in our platform and prop
osition. Cash spend on our IT development was
£2.0m alongside nearly £1.0m on TYA premium,
and continued support for our partnerships and
marketing.
Shareholders – Aside from the significant share
price gain during the financial year, we announced
in April that the Group intends to resume dividend
How customers buy FY24 (Value %)
75%
Revenue from clients
that buy both Data and
Consultancy
System1 Group PLC Annual Report and Accounts 2024
12
CEO’s Statement continued
payments and today announced a 5p per share
dividend for FY24 subject to shareholder approval
at the forthcoming AGM.
7
We have a robust support structure and
performance culture that allows us to
help the world’s largest advertisers make
confident creative decisions
FY24 has been a strong year in building out our
performance culture and we have highly moti
vated teams with strong retention and employee
engagement. We create an environment where all
colleagues can do their jobs with ease to ensure
they are focussed on adding value to our cli
ents. We monitor staff satisfaction quarterly with
focus teams owning actions on the feedback pro
vided. By removing the blockers from our teams’
day-to-day lives, we have seen staff happiness
reach record levels in FY24, and this was further
enhanced with System1 recognised as a “Sunday
Times Great Place To Work” in the UK for the first
time.
Outlook: we haven’t scratched the surface of
where we could get to
FY25 is a year where we are seeking to maintain
the momentum gathered in FY24 and start to spin
our flywheel even faster. The new financial year
has started strongly, particularly in the US, and we
anticipate an increase of 50% in Q1 total revenue
with platform revenue up 70% versus Q1 FY24.
As a result we continue to expect strong double-
digit revenue and profit growth for the financial
year as a whole. Bespoke consultancy will likely
fall as we reach the end of some long-term con
tracts that will not renew, however this should not
significantly affect overall group revenue or profit
growth.
We have three big opportunities that fill me
with belief for the year ahead.
Firstly, we are making headway into the US
market. Our go-to-market investment in FY24
has grown our fame, and we plan to increase this
investment for the year ahead. We have strength
ened the commercial teams across sales and
marketing, with Michael Perlman joining as global
Chief Commercial Officer, and Alex Banks as SVP
Commercial Americas, leading the US and LatAm
sales teams – both executives are based in the US
and have significant commercial leadership expe
rience in our industry sector.
Secondly, the relaunch of our Test Your
Innovation product suite will allow us to cre
ate a revenue stream for Innovation that could
eventually become bigger than our Comms rev
enue stream. We say this because according to
ESOMAR research, the target addressable market
for innovation is 4.8X that of communications at
$12.02bn.
Thirdly, we’ve not yet maximised the revenue
opportunities from the world’s largest advertisers
we already work with. Alongside the new busi
ness engine we have firing, we have a renewed
focus on ensuring that we expand within those
clients we have already won, to ensure we are in
each brand and region for each of our 3 product
lines (Comms, Innovation and Brand).
We recognise that we will need to invest in
FY25 to deliver our growth ambitions and we
have created, and are already filling or recruit
ing 20 new roles in FY25. As the business grew
faster than expected in FY24, some of these roles
are in operational and
support positions to
ensure we continue
to deliver high quality
outcomes for our cli
ents. The other roles
are
investments
in
future growth across our commercial and market
ing teams, with significant focus in the US.
Finally, thank you to all of our staff who make
our flywheel spin, to our customers for making
world class marketing with confidence in their
creative and to our shareholders for their contin
ued support.
James Gregory
Chief Executive Officer
System1 Group PLC Annual Report and Accounts 2024
Financial Review
13
Overview
2024
2023^
(“FY24”)
(“FY23”)
Change
Change*
£m
£m
£m
%
Restated
Results for the year ending 31 March
Platform Revenue (“Predict & Improve”)**
24.8
17.4
7.4
43%
Other Revenue (Bespoke consultancy)
5.2
6.0
(0.8)
-13%
Total Revenue
30.0
23.4
6.6
28%
Direct Costs
(3.9)
(3.7)
(0.2)
6%
Gross profit
26.1
19.7
6.4
32%
Operating costs
(23.4)
(18.9)
(4.5)
24%
Other operating income
0.4
-
0.4
nm
Finance expense
-
(0.1)
0.1
-108%
Profit before tax
3.1
0.7
2.4
333%
Tax charge
(1.1)
(0.3)
(0.8)
241%
Profit for the financial year
2.0
0.4
1.6
403%
All figures in the Financial Review are presented in millions rounded to one decimal place unless specified otherwise. Percentage movements are calculated
based on the numbers reported in the financial statements and accompanying notes.
^ FY23 has been restated to bring it in line with IFRS 16 rules relating to sublease income on our old New York office. The restatement does not affect Profit
before Taxation, but reduces FY23 Adjusted EBITDA by £0.2m. See note 3 for more information.
* Year-on-year percentage change figures are based on unrounded numbers.
** Data and data-led consultancy
2024
2023^
Change*
(“FY24”)
(“FY23”)
%
Restated
Key performance indicators
Platform revenue growth
43%
40%
3% points
Number of clients
428
297
44%
Gross profit % Revenue
87%
84%
3% points
Adjusted EBITDA £m1
4.4
1.6
175%
Adjusted EBITDA % Revenue
15%
7%
8%
Rule of 402
57%
47%
10% points
Free Cash Flow (FCF) £m3
4.0
(3.1)
7.1
FCF % Adjusted EBITDA
92%
(196%)
288% points
Net Cash (£m)
9.6
5.7
3.9
Diluted earnings per share
16.0p
3.2p
404%
Dividend per share
5.0p
-
nm
1. Profit before taxation + share-based payments + interest, depreciation and amortisation
2. Platform Revenue growth %+ Adjusted Group EBITDA % Group Revenue
3. Cash flow after interest and before debt raising/reduction, buybacks/dividends
Revenue performance
Total Revenue reached £30.0m up 28% on FY23.
Platform revenue rose by £7.4m (43%) in the year to
£24.8m due mainly to continued strong growth in
automated ad-testing revenues. Predict Your platform
revenue rose 41% fuelled by the continued success of
Test Your Ad, notably the new TYA+ variant. Improve
Your platform-led consultancy revenue increased by
51%, benefiting from System1’s strategic focus on the
world’s largest advertisers. Overall platform revenue
represented 82% of total revenue in FY24, compared
with 74% in the previous year. Other revenue, primar
ily bespoke consultancy, fell by £0.8m in the year, as
customers continued to adopt the standard platform
products, and the company focused its resources
accordingly.
The Communications (Comms) product group,
including Test Your Ad, grew by £6.9m (43%) year-
on-year, notably in the UK, Europe and the US.
Communications
revenue,
including
ad-testing,
accounted for 76% of all revenue in FY23 (FY22: 68%).
Innovation revenues increased by £0.2m (5%), and
Brand Tracking revenues were down by £0.5m (13%).
The geographic spread of the business remained simi
lar to the previous financial year.
Direct costs
Direct costs increased by 6% year on year on Revenue
growth of 28%, reflecting a higher proportion of Plat
form Revenue and efficiencies in the supply chain,
including further automation and new outsourcing
partners. As a consequence of these improvements the
gross profit margin rose by 3 points to 87%.
System1 Group PLC Annual Report and Accounts 2024
14
Growth driven by platform revenue ( m)
…and Comms (TYA)
Gross Profit Margin helped by Platform
Financial Review continued
30
25
20
15
10
5
FY23
FY24
Platform
Bespoke Consultancy
25
20
15
10
5
Comms
Innovation
Brand
FY23
FY24
88
86
84
FY23
FY24
Variable pay reflects performance,
fixed pay held flat
System1 Group PLC Annual Report and Accounts 2024
Operating costs
Total operating costs increased to £23.4m (FY23:
£18.9m) due mainly to employment costs (including
higher variable performance pay linked to targets),
increased customer acquisition costs, lower net ben
efit of capitalised IT development costs, and foreign
exchange translation effects on non-sterling debtors
and bank accounts. Some £3.1m was invested in devel
opment and innovation during the year, related primar
ily to the marketing predictions platform, automated
prediction products, TYA Premium database, and AI-
related research and development.
Average employee numbers were slightly below the
previous year, despite recruitment in customer facing
roles in H2 that is set to continue into FY25.
Profit before taxation
Profit before taxation for the year of £3.1m was £2.4m higher than the previous year owing to the flow through of far
higher sales volumes and improved margins, more than offsetting a 24% increase in operating costs.
Tax
The Group’s effective tax rate decreased from 44% to 35%. This is due mainly to the impact of R&D tax credits in
respect of FY21 and FY22 (£0.2 m recognised in FY24, £nil in FY23). The R&D claim for FY23 is in progress, but is yet
to be approved and has not been recognised in the financial statements.
Funding and liquidity
Cash net of debt rose by £3.9m from £5.7m to £9.6m, broadly in line with the £4.0m free cash flow. £6.4m of cash
was generated from operations; £0.9m was invested, including £0.7m in capitalised software development; and £1.0
was spent on property leases including imputed interest. A stronger GBP compared to FY23 year-end reduced value
of non-Sterling cash balances by £0.1m.
Dividend
No dividend was paid during FY24. In April 2024 the Board announced its intention to resume paying dividends, in
line with the existing policy to distribute 30–40% of after-tax earnings through the cycle. At this stage the Board
expect this to be through the declaration of a single ordinary dividend each year alongside the Company’s full year
result. The Board is proposing a dividend of 5.0 pence per share for FY24 (record date 27 September 2024) which
will be put to the Group’s annual general meeting on 25 September 2024 and will be payable on 18 October 2024.
Chris Willford
Chief Financial Officer
15
18
15
12
9
6
3
FY23
FY24
Salary & benefits
Variable pay
System1 Group PLC Annual Report and Accounts 2024
The Board is responsible for reviewing risk and regularly reviews the risks facing the Group, as well as the controls in
place to mitigate potential adverse impacts. The risk register is assessed at least twice a year, but the Board’s con
sideration of risk matters is not limited to those formal reviews. The Audit Committee reviews the effectiveness of
financial controls. The Board endeavours to identify and protect the business from the big remote risks: those that do
not occur very often, but which when they do, have major ramifications. The types of event that we are concerned
about and seek to manage are summarised below.
16
Principal Risks and Uncertainties
Risk Area
Potential Impact
Mitigation
Loss of a significant
customer
Revenues and profits fall
due to the loss of a large
customer
We work with more than 400 customers and work
hard to earn their loyalty. Our customer base is diversi
fied such that we have no customers contributing over
10% of revenue.
Loss of key personnel
Key personnel leave
the business, taking
knowledge and external
relationships with them
We seek to ensure that System1 is as attractive to exist
ing employees as it is to talented external recruits.
Reward is competitive, and regular performance
evaluation identifies individuals who may be “at risk”.
For the most senior executives, the LTIP (long-term
incentive plan) and STIP (short-term incentive plan)
are designed to provide a strong financial motivation
to stay at System1. These incentives are reviewed peri
odically to ensure they remain effective.
Loss of a critical supplier
The bankruptcy, change
of control or resignation
of a strategic supplier
leaves the Company
unable to meet customer
demand
We have several mission-critical functions carried out
by third-party suppliers (such as panel suppliers). For
these functions, we seek to ensure we are not too reli
ant on any one organisation and typically have three
qualified providers. We work in close co-operation
with our strategic suppliers, ensuring that any issues
and concerns are surfaced rapidly and resolved in
partnership.
Loss of assets, data,
intellectual property
Theft of intellectual prop
erty via unauthorised or ille
gal access to or copying of
the Company’s databases,
proprietary methods, and
algorithms
We endeavour to protect the business from significant
risks, through a combination of trademark protection;
insurance; development of internal guidelines and
policies; comprehensive information security pro
gramme, and our employee, customer and supplier
terms and conditions.
Litigation risk
Legal action is taken
against the Company by
customers, employees,
suppliers, or other
stakeholders
We endeavour to protect the business from significant
risks, through our terms and conditions, trademark
protection and comprehensive professional indem
nity insurance.
System1 Group PLC Annual Report and Accounts 2024
17
Risk Area
Potential Impact
Mitigation
Strategic risk
Technological advances
including artificial intel
ligence reduce the com
mercial viability of the
Group’s methodology
The Group does not
compete effectively in
the largest and faster-
growing markets
The Group positions itself as “the most predictive”
provider of information to support creative and
marketing decisions. Currently a combination of
real-life panel respondents and System1’s methodol
ogy achieves this goal. Our S1 Futures programme
includes an exploration into how AI could transform
predictive research.
The Group formally reviews product and geographic
markets as part of its regular strategy review. We
have upweighted our presence in the US to reflect
the significant opportunity in that market and are
relaunching Test Your Innovation in order to improve
our performance in the largest of our chosen product
markets.
An outage or other
technical issues on our
survey platform results
in delays in delivering
customer projects
A reduction in panel data
quality affects the com
pany’s reputation with
key customers
A cyber-attack causes a
material breach to our
infrastructure
The volume of change
initiatives could lead
to a loss of operational
control
All our services are hosted on a secure external cloud
infrastructure with multiple failover options. We con
tinuously monitor system availability and endeavour
to alert the customer to any delays on the rare occa
sions where there is disruption.
We conduct both operational and strategic reviews
of respondent quality in close collaboration with our
approved panel suppliers and can switch provider
where required via our platform API.
Our business does not ordinarily hold non-employee
personal data. Any personal data of clients’ or suppli
ers’ employees is held by System1 in compliance with
the applicable legislation. We have invested in our
controls (including penetration tests), processes and
IT infrastructure and have held ISO 27001 accredita
tion covering information security since 2019.
All change initiatives are subject to project gover
nance, and development is run on an “agile” meth
odology. The Executive Team reviews operational
performance regularly providing early warning of
potential deviations from plan. The Board reviews
operational performance monthly and strategic
direction regularly and when appropriate.
Failure to manage credit,
currency, market, interest
rate or liquidity risk expose
the Group to losses
Due to the straightforward nature of the business, its
international cost base, the Group's strong balance
sheet, and the fact that most of the Group’s custom
ers are large, credit-worthy organisations, foreign
exchange and credit risks have historically proved to
be modest. Further information is given in Note 8 to
the financial statements.
Operational risk
Financial risk
Risk Area
Potential Impact
Mitigation
Environmental and
political risk
The Group’s revenue
streams could be affected
by customers’ decisions to
reduce marketing budgets
Shareholder relations: the
Company’s plans could
be opposed by significant
shareholders
Political risk through
adverse regime or regula
tory change
The Group trades principally in Europe and the USA
and is exposed to the social and economic impacts
in those regions. The 2020 Covid-19 pandemic dem
onstrated the Group’s resilience during an economic
downturn. The main exposure is to our customers’
decisions on the size of market research budgets in
response to external events and macroeconomic fac
tors such as inflation and interest rate increases.
The Company holds comprehensive investor one-on-
one and group meetings in roadshows at least twice a
year. In addition, quarterly trading updates provide an
opportunity to engage with shareholders and poten
tial investors.
The territories representing the vast majority of the
Group’s revenue are socially, politically, and economi
cally stable. We do not currently service clients based
in Russia or Belarus, and our operations have not been
directly affected by the ongoing conflicts in Ukraine
or Gaza. We have a regional operations centre in Bra
zil where just under 10 percent of our employees are
based and are comfortable that the benefits of the
operation outweigh the slightly elevated risks.
Conflicts of Interest
Directors’ and employees’
personal, financial or busi
ness affairs may result in
situations where the com
pany’s interests are not
fully aligned with their own
The Board formally records directors’ interests at each
meeting, and directors’ new external appointments
are notified as soon as is practical. Below board level
the company reviews senior employees’ outside inter
ests on a case-by-case basis to ensure no detriment to
the company arises.
Reputational risk
Press releases or other
statements from the com
pany could include incor
rect or defamatory content,
adversely affecting the
company’s reputation
with customers and other
stakeholders
Comments or articles
posted by employees
on social media could
adversely affect the Group’s
reputation with customers
and other stakeholders
All trade press releases are reviewed by at least one
member of the Executive. Financial releases are
reviewed by at least two Board members and our
Nominated Adviser.
The Group has a social media policy which sets out
employees’ duty of care when posting work-related
content on social media.
System1 Group PLC Annual Report and Accounts 2024
18
Principal Risks and Uncertainties continued
Environmental and Social Report
System1 Group PLC Annual Report and Accounts 2024
Section 172 of the Companies Act requires the Board to take into consideration the interests of stakeholders in its
decision making. This section provides information about the Board’s approach to engagement with stakeholders,
namely:
•
Customers
•
Talent
•
Investors
•
Suppliers
•
Community and Environment
In determining the Board’s approach, the Board members have regard to the following:
•
The likely consequences of any decision in the long term
•
The interests of the company’s employees
•
The need to foster the company’s business relationships with suppliers, customers and others
•
The impact of the company’s operations on the community and the environment
•
The desirability of the company maintaining a reputation for high standards of business conduct, and
•
The need to act fairly as between members of the company.
Overarching the Group’s approach to all stakeholders is System1’s culture pyramid:
Section 172 Report
20
Customers
Our target customers are the world’s largest advertisers. The board understands the importance of forming and
retaining good working relationships with its existing and target customers.
These customers understand that creativity is the most powerful tool for growth within their control.
“The power of creativity for growth could be considered our industry’s most fundamental reason for being.
Creativity is a superpower”
Marc Pritchard, P&G Chief Brand Officer
System1 helps these companies make confident creative decisions that lead to transformational business results.
Our advertising and idea tests measure emotion to give our customers the most accurate predictions of the business
impact of creativity. We also provide expert guidance to our customers to help them improve the effectiveness of
their ad or innovation.
Mission
Identity
Beliefs & Values
Capabilities
Behaviours
Environment
To give marketers the Confidence to make the most effective Creative decisions
The Marketing Decision Making Platform that harnesses the power of emotion to
drive growth for the world’s leading brands
Customer Commitment, Creativity, Collaboration, Conviction
Top talent, managed & developed expertly, clarity of expectations
T.I.D.E. team behaviours, personal behaviours & trust
System1 and flexible (modern working)
System1 | The Culture Pyramid
System1 Group PLC Annual Report and Accounts 2024
21
Talent
Our primary focus is on attracting, growing, and retaining world class talent to drive and deliver against our strategy,
with a culture of healthy performance. To achieve this, we embed structures that promote equal opportunity and
guard against discrimination. We are proud of being an inclusive organisation – our culture is founded on principles
of inclusion such as feedback, honesty, and creativity.
How we engage with our talent
We have cultural values (Customer Commitment, Creativity, Collaboration and Conviction) as well as a set of team
behaviours known as TIDE, which describe how we work together.
This helps to ensure that employees understand the behaviours expected of them and allow us to operate a high trust
environment, which is linked to business success. We embed our values and behaviours by the following:
1.
Introducing them to all employees during their onboarding programme, as part of a 1Welcome afternoon,
chaired by the CEO and Chief People Officer
2. Making them a consistent part of all company communications and
3. Celebrating examples of best practice with awards on our Town Halls.
We conduct quarterly employee input surveys which are reviewed by the Board. These use our FaceTrace method
ology to capture how employees feel about working at System1, along with reasons. We also ask them what is work
ing well, what could be improved and add a topical question. We hold follow up discussions with each team across
the business, chaired by the team leaders and the HR team to agree improvements, actions and owners.
In addition to monthly Town Hall meetings with all staff, we also hold monthly senior management forums and run
monthly workshops with managers. These meetings give us the opportunity to connect across the business at differ
ent levels, share and cascade updates and celebrate success – including System1 Value Awards, where employees
are nominated by colleagues and are recognised for working according to our values.
We pay fairly – there is no discrimination across any factor – we ensure this by using benchmarking data and
conducting annual salary reviews by individual and across roles, and there is a structured approach to career and
professional development across the business, based on departmental and cross-company leadership frameworks,
to ensure there is clarity and consistency in our expectations and performance ratings. We have a strong learning
and development culture. We encourage employees to plan their development using the support and resources we
provide (including internal training programs, professional certifications and MBA sponsorships). We advertise roles
internally and promote inter departmental opportunities.
Truth – always tell the truth… and tell it early
Intent – always assume good intent…yet resolve
issues
Debate – Debate… Decide & Unite
Elephant – Don’t allow ‘elephants’ in the room…
yet be empathetic in dealing with them
System1 Group PLC Annual Report and Accounts 2024
22
Talent engagement outcome
We continue to develop our hybrid virtual working approach, working closely with managers and all employees to
maximise productivity, creativity and happiness. We believe in a healthy performance culture and use the below
model to guide us in achieving this.
We are continuously evolving our engagement tools, based on feedback and measures.
In October 2023 we introduced automated, mandatory 360 feedback for all employees and in March 2024 we
launched department and behaviour frameworks, both of which have been very well received and provide useful
input for development planning.
In April 2024 we adopted a Flexible Holiday policy, following a successful trial in FY24. This builds on our Flexible
Working approach and Flexible Benefits platform and provides our employees with increased autonomy when it
comes to choosing how they work and rest.
We continue to find it very important to regularly bring people together in person, to share updates and build
relationships, to complement the time spent working remotely. We run 1derful Wednesday events to encourage
employees to socialise together in the office and hold regional and all-company Strategy meetings half yearly.
Investors
The most visible way that the Company takes the interests of equity investors into consideration is through the high
level of share ownership on the Board. In addition, the Group Executive Team members’ interests are aligned through
their participation in a long-term incentive plan.
The Company encourages two-way communications with all its shareholders and responds quickly to requests
or queries received. Larger investors and potential investors are invited to meet management after the full-year and
interim results. We also run virtual meeting and presentations via InvestorMeetCompany, an investor engagement
platform which we use for capital markets days, group meetings of investors after full year and interim results, and
the annual general meeting. In addition, the Company maintains regular contact with its principal bank to ensure that
it is kept informed of the Company’s performance and prospects.
Communication is primarily through the Company’s website and the Annual General Meeting where participation
is encouraged so that the Board may answer questions. All shareholders have at least twenty-one clear days’ notice
of the Annual General Meeting.
All shareholders will receive a copy of the Annual Report. We encourage the use of electronic copy but still pro
duce a very small quantity of hard copies for investors who request them. The interim report is available online via
the Company’s website.
The Group seeks advice from its Nominated Advisor, Canaccord on all formal shareholder communications and
relies on their services to arrange the twice-yearly investor “roadshows”.
Section 172 Report continued
Strong Leadership
– Led by Executive
Stretching Environment
– Performance Management
Good Management
– Manager Training
Clear strategy & comms
Motivation & recognition
Values, behaviours & trust
Lead by example
Promote health & wellbeing
Set pace and urgency
High expectations
of self and others
Stretch objectives
Personal
development
Regular 360
feedback
Clear direction –
SMART objectives
Support – feedback,
empower, motivate,
recognition
Resources – align
resources with
objectives so task is
realistic
Support
Support
System1 Group PLC Annual Report and Accounts 2024
23
Suppliers
We work with a small number of trusted suppliers and operate on a strong partnership basis. As outlined in the
Principal Risks and Uncertainties section on page 16, the loss of a critical supplier could leave the Group unable to
meet customer demand, therefore the Board has regard to the importance of fostering good relationships with our
suppliers to promote the success of the Group. Our approach is centred on lean principles and continuous quality
improvement, with weekly and monthly meetings to review service levels, KPIs and resolve issues. We share data
between teams to ensure that there is one view of our partnership metrics.
Our key delivery suppliers include:
•
MAP Marketing Research provides us with survey programming and project management services
•
Toluna, Prodege and NetQuest provide us with market research panel respondents to complete our surveys
•
Datawise provides us with bespoke data processing and charting services on our non-standard deliverables
•
Intonation provides us with translation services (forward translation of questionnaires and back translation of
respondent verbatim)
Community
ESG Strategy
This year, we have launched a new ESG Strategy, driven by a steering committee formed of Executive and Senior
Managers in Talent, Legal and Finance departments and with sign off from the Board.
Environment
We understand the importance of tackling carbon emissions. Although System1’s operations fall outside of manufac
turing and are primarily online, they are not entirely carbon-neutral. System1 has partnered with Greenly, a leading
carbon emissions company. With their support, we have developed a comprehensive plan to measure, reduce and
offset our carbon footprint.
The journey with Greenly began with an assessment of System1’s emissions across the entire value chain, from
daily operations to supply chain logistics. We determined that our emissions are most prevalent in Scope 3 – emis
sions from the activities by those System1 indirectly affects in our value chain.
Throughout 2022, System1 registered 0.066 KGCO23/GBP, which is slightly lower than the median of our com
petitors within the sector at 0.070 KGCO23/GBP (based on 61 companies). In particular, our commuting figures are
lower than average, driven by the high number of remote team members.
There are areas for improvement as well. Travel outside of commuting to work remains higher than average. Our
outsourcing strategy contributes to a higher-than-average figure for services purchased, as expected.
System1 Group PLC Annual Report and Accounts 2024
24
With Greenly’s expertise and guidance, System1 is implementing solutions to reduce emissions, including:
•
Updated travel policy to encourage employees to take trains rather than planes where possible
•
A more rigorous approval process for external conferences, to promote local travel only
•
Global annual event held in the UK (where we have most employees) to reduce the need for flying
•
Second annual event held regionally, to avoid the need for most employees to fly
•
Switched to least data-intensive formats for our marketing assets
•
Provision in our road map to include a clause that asks our suppliers to conduct mandatory carbon reporting and
target a 3% reduction, at the time of contract renewals in new contracts
•
Continue to extend lifespan of IT equipment (extended from 3 to 4 years in 2022)
As a result of the efforts of all stakeholders, System1’s recommendations and actions are predicted to decrease
our emissions by 2%–2.5% of total emissions against turnover per year.
Social
Under the second pillar, we have focused on infusing System1’s HR strategy with values of social responsibility and
inclusivity. This includes reviewing existing social initiatives, like employee benefits, community engagement pro
grams, and diversity and inclusion efforts, as well as analysing Satistraction surveys containing employee feedback
on the impact of existing social initiatives.
The following recommendations were agreed, which will be actioned with the support of our employee resource
groups:
•
Training – extend bias training to entire company and conduct bi-annually
•
Local communities – commit to reinforcing that employees can participate in at least 1 Look Out volunteering
initiative per year
•
Diversity policy – review at least annually and ensure accuracy
•
Health & Safety – have a dedicated and trained global health & safety rep
•
Communication – communicate the ESG strategy via 1Hub (Sharepoint) so all employees are aware of what we do
and our goals
Section 172 Report continued
System1 Group PLC Annual Report and Accounts 2024
25
Governance
The third and final pillar is focused on governance and owned by our legal and finance leaders. The governance goals
for FY25 are to:
•
Annually review existing governance structures and practice in light of industry standards and regulatory require
ments
•
Continue to provide regular training to board members and decision-makers in the business to ensure all are well
equipped
•
Continually assess risk management procedures – to ensure they effectively identity, assess and mitigate risks in
alignment with corporate objectives and regulatory expectations
•
Further strengthen stakeholder engagement – strategies to enhance communication and collaboration with
stakeholders, employees, customers and the wider community
•
Regularly monitor compliance – collaborating closely with key stakeholders, including the Senior Independent
Non-Executive Director, and regularly review compliance with all relevant laws, regulations, and internal policies,
taking corrective action as necessary
•
Evaluate board performance periodically – conducting an annual evaluation of the board’s performance to iden
tify areas for improvement and ensure its composition aligns with the company’s strategic direction
•
Review and update policies and procedures – systematically review and update governance policies and proce
dures to reflect changes in the legal and regulatory environment, as well as evolving best practices
•
Oversee Technology and Cybersecurity – regularly assess the effectiveness of technology use and cybersecurity
measures in protecting company assets and information, including staff training
•
Succession planning – maintain a comprehensive succession plan for key executive and board positions to ensure
long-term leadership continuity
On behalf of the Board
Chris Willford
Chief Financial Officer
Governance & Group Directors’ Report
System1 Group PLC Annual Report and Accounts 2024
27
Review of the business and future development
The Chairman’s Statement, CEO’s Statement, the Financial Review, the Section 172 Report, Principal Risks and Uncer
tainties, and the Corporate Governance Report set out:
•
the issues, factors and stakeholders considered in determining that the Directors have complied with their respon
sibilities under section 172 of the Companies Act 2006 (Corporate Governance Review);
•
the methods used to engage with stakeholders and understand the issues to which the Directors must have
regard under section 172 of the Companies Act 2006 and the effect on the Company’s decisions and strategies
during the year (Corporate Governance Review);
•
the way that management view the business (Group Overview, Chairman and CEO’s statements, Financial Review);
•
its strategy, positioning, and objectives (Group Overview, Chairman and CEO’s statements).
•
its historic financial performance (Chairman and CEO’s statements, Financial Review);
•
an assessment of its future potential (Group Overview, Chairman and CEO’s statements, Financial Review);
•
its key performance indicators (Financial Review); and
•
its key business risks (Principal Risks and Uncertainties).
Dividends
The Company did not pay a dividend in the year ended 31 March 2024 and proposes to pay a dividend of 5.0p per
share.
Directors
The following individuals served as directors of the Company, System1 Group PLC, during the year and up to the date
of approval of the financial statements:
James Gregory
(Executive)
John Kearon
(Executive)
Chris Willford
(Executive)
Conrad Bona
(Non-Executive)
Rupert Howell
(Non-Executive)
Phillip Machray
(Non-Executive)
Sophie Tomkins
(Non-Executive)
The Remuneration Committee Report sets out directors’ interests in the shares of the Company.
Share capital
At 31 March 2024, the Company had 13,226,773 Shares in issue (2023: 13,226,773) of which 547,844 were held in
treasury (2023: 547,844). The treasury shares will be used to help satisfy the requirements of the Group’s share
incentive schemes.
Substantial shareholders
As at 31 May 2024, the Company was aware of the following significant interests in the ordinary issued share capital
of the Company.
% of voting
Number
shares
John Kearon
2,818,235
22.2
BGF Investment Management Limited
880,000
6.9
Stefan Barden
853,554
6.7
Kestrel Investment Partners
674,000
5.3
Herald Investment Mgt
595,111
4.7
Lombard Odier Asset Mgt
528,476
4.2
Ennismore Fund Mgt
523,012
4.1
University of Notre Dame Du Lac
500,000
3.9
Motley Fool Asset Mgt
479,670
3.8
AXA Investment Mgrs
457,128
3.6
Group Directors’ Report
Financial risk management
The Group’s activities expose it to the following financial risks. Further assessment of financial risks is outlined in
Note 8 to the Consolidated Financial Statements.
Credit risk
We manage credit risk on a Group basis, arising from credit exposures to outstanding receivables and cash and cash
equivalents. Since the majority of the Group’s customers are large blue-chip organisations, the Group rarely suffers
a bad debt. The Group’s cash balances are held, in the main, at HSBC Bank.
Market risk – Foreign exchange risk
In addition to the United Kingdom, the Group operated in the United States, Rest of Europe, Brazil, Singapore, and
Australia during the period and was exposed to currency movements impacting commercial transactions and net
investments in those countries. Management endeavours to match the currencies in which revenues are earned with
the currencies in which costs are incurred. So, for example, the US operation generates most of its revenue in US
dollars and incurs most of its costs in US dollars also.
Liquidity risk
The Company monitors its cash balances regularly and holds sufficient cash in immediately available current
accounts to minimise liquidity risk. The Company has an overdraft facility with HSBC.
Other risks
Management do not consider price risk or interest rate risk to be material to the Group.
Capital risk management
The Group manages its capital to ensure that it can continue as a going concern while maximising its return to share
holders. The Company has a £1.5m secured overdraft facility with HSBC. To the date of the signing of these financial
statements, no amounts have been drawn under the overdraft facility. The Group has not entered any derivative
contracts.
Going concern
As noted in Principal Risks and Uncertainties, and in note 3 to the consolidated financial statements, the Directors
have considered financial and operational risks in the prevailing economic climate and marketing industry trends in
the going concern assessment. In addition to the mitigating actions taken by the Company to address these risks, the
Directors have closely monitored the performance of the Group throughout the year, noting the £9.6m cash balance
at year-end and the availability of a £1.5m overdraft facility (which has not been drawn to date).
The Group has reviewed its financial forecasts for the 12 months from the approval of these financial statements,
flexing sensitivity analysis scenarios with external and internal inputs that would represent the Group’s central fore
cast and various downturn scenarios.
Accordingly, after making appropriate enquiries, at the time of approving the financial statements the Directors
have a reasonable expectation that the Company and the Group have adequate resources to continue in operational
existence for at least 12 months from the approval of these financial statements. For this reason, the Directors con
tinue to adopt the going concern basis in preparing the Company and Group financial statements.
System1 Group PLC Annual Report and Accounts 2024
28
Group Directors’ Report continued
System1 Group PLC Annual Report and Accounts 2024
29
Research and development
The Company’s Labs and IT Development teams are involved in the development and validation of new market
research methods and products.
Employees
The Group maintains fair employment practices, attempts to eliminate all forms of discrimination and to give equal
access, and to promote diversity. Wherever possible we provide the same opportunities for disabled people as for
others. If an employee were to become disabled, we would make every effort to keep them in our employment, with
appropriate training where necessary.
Health and safety policies
The Group does not have significant health and safety risks and is committed to maintaining high standards of health
and safety for its employees, visitors, and the public.
Directors’ indemnities
Directors’ and officers’ insurance cover has been established for each of the Directors to provide cover against their
reasonable actions on behalf of the Company. The indemnities, which constitute a qualifying third-party indemnity
provision as defined by Section 234 of the Companies Act 2006, remain in force for all current Directors. All relevant
information known to the Directors has been relayed to the appointed auditor.
Disclosure of information to auditors
The directors are responsible for the maintenance and integrity of the corporate and financial information included
on the System1 Group PLC website. Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
In the case of each Director in office at the date the Directors’ report is approved:
•
so far as the director is aware, there is no relevant audit information of which the Group’s and Company’s auditors
are unaware; and
•
they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any
relevant audit information and to establish that the Group’s and Company’s auditors are aware of that information.
On Behalf of the Board
Chris Willford
Chief Financial Officer
System1 Group PLC Annual Report and Accounts 2024
The directors are responsible for preparing the Group Strategic Report, Group Directors’ Report, and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare Group and Company financial statements for each financial year.
The directors have elected under company law and are required by the AIM Rules of the London Stock Exchange
to prepare the group financial statements in accordance with UK-adopted international accounting standards and
have elected under company law to prepare the company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) including
Financial Reporting Standard 101 “Reduced Disclosure Framework”.
The Group financial statements are required by law and UK-adopted international accounting standards to pres
ent fairly the financial position and the financial performance of the Group and Company. The Companies Act 2006
provides in relation to such financial statements that references in the relevant part of that Act to financial statements
giving a true and fair view are references to their achieving a fair presentation.
Under company law the directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group
for that period.
In preparing each of the Group and Company financial statements, the directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. for the Group financial statements, state whether they have been prepared in accordance with UK-adopted
international accounting standards;
d. for the Company financial statements, state whether applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained in the Company financial statements;
e. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Group and the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Group and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of
the Group and the Company and enable them to ensure that the financial statements comply with the requirements
of the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included
on the System1 Group PLC website. Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
On behalf of the Board
Chris Willford
Chief Financial Officer
30
Statement of Directors’ Responsibilities
System1 Group PLC Annual Report and Accounts 2024
Governance
System1 understands how vital good governance is for achieving our business goals and sustainability targets. We
will share more about our approach to governance in later sections of this report.
We know that good governance is key for our company’s success. It benefits everyone involved with our group –
not just our shareholders, but our employees, clients, and partners too. That is why we have built a governance struc
ture that makes sure our decisions are transparent, responsible, and uphold the highest ethical standards.
We are committed to ongoing review and refinement to make sure we manage risks effectively and stay compliant
with laws and regulations.
Our Board of Directors is central to our governance structure. It consists of individuals with a wide range of skills
and experiences. They provide critical oversight, strategic counsel, and informed decision-making, ensuring our
commitment to the highest ethical standards is never compromised.
Employee engagement and development form a crucial part of our governance strategy. Our significant invest
ment in ongoing professional development ensures our team is equipped with the latest industry knowledge, skills,
and best practices to deliver exceptional market research and insights to our clients.
As we move forward, we are committed to maintaining and improving our governance standards and to promot
ing a culture of responsibility, integrity, and excellence throughout System1.
As an AIM-listed company, System1 adheres to the ten principles of the Quoted Companies Alliance (QCA)
Corporate Governance Code. The QCA Code identifies ten principles that underpin growth in long-term shareholder
value, encompassing an efficient, effective and dynamic management framework accompanied by good communi
cation to promote confidence and trust.
31
Corporate Governance
Establish a strategy and
business model to promote
long-term value for share
holders
Our strategy is to grow the platform-based predic
tions business and achieve economies of scale
See Group Overview
page 3 and CEO’s State
ment on page 5
Understand and meet share
holder needs and expecta
tions
The CEO and CFO communicate regularly with
investors at half-yearly results roadshows
Visit system1group.com/
investors for further
information
Take into account wider
stakeholder and social
responsibilities and their
implications for long-term
success
The preferences of customers, employees,
suppliers, community as well as investors inform
our decision making
See Section 172 Report
page 20 and
system1group.com/
investors
Embed effective risk
management, considering
both opportunities
and threats, throughout
the organisation
The Board is responsible for setting risk appetite
and tolerance. The Executive manages risk day
to day
See Principal Risks and
Uncertainties page 16 and
Board Effectiveness page
36
Deliver growth
System1 Group PLC Annual Report and Accounts 2024
Strategy
All directors are familiar with the market in which the Group is operating, the Group’s value proposition, and its stra
tegic intent.
The Board actively participates in setting, and regularly reviewing, the strategy of the business, and is responsible
for ensuring that the Company’s business model is, and remains, aligned to the achievement of its strategic objec
tives. The Company sets out its strategy within the Strategic Report section of its Annual Report and Accounts.
32
Communicate how the
Company is governed and
is performing by maintain
ing a dialogue with share
holders and other relevant
stakeholders
The investors section of our website includes
our Annual Report, results, presentations, notice
of AGM and results of the AGM and general
meetings.
See Remuneration and
Audit Committee reports
on pages 40 and 38 and
Visit system1group.com/
investors for further
information
Maintain the Board as a
well- functioning,
balanced team led by the
Chair
The Board has two Committees: Audit Committee;
and Remuneration Committee. The composition
and experience of the Board is reviewed in the
Board Evaluation. All Directors recognise the need
to commit sufficient time to fulfil the role. This
requirement is included in their letters of appoint
ment. The Board is satisfied that the Chair and
Non-executive Directors devote sufficient time to
the Group’s business.
See Corporate
Governance page 34
and 35
Ensure that between them
the Directors have the nec
essary up-to-date experi
ence, skills and capabilities
The Board members have the appropriate ranges of
skills and experience, covering, Sales & Marketing,
Technology, Finance, Governance and Sustainability
See Board experience
pages 37 and Board Effec
tiveness page 36
Evaluate Board perfor-
mance based on clear and
relevant objectives, seeking
continuous improvement
The Board carries out an annual effectiveness review
assess its strengths and areas for development and
improvement
See Corporate
Governance page 33 and
Board Effectiveness
page 36
Promote a corporate cul-
ture that is based on ethical
values and behaviours
The culture of System1 is guided by the core
“TIDE” values
See Section 172 Report
page 21
Maintain governance struc
tures and processes
that are fit for purpose and
support good decision mak
ing by the Board
The Board is satisfied that the delegated authorities
and budgetary processes in the company are
adequate to support its strategic growth plans. The
Board regularly considers the need to adapt and
improve processes in line with the growth of the
entity including any associated investment in tools
and resources.
See Board of Directors
page 37 and
system1group.com/
investors
Maintain a dynamic management framework
Build trust
Corporate Governance continued
System1 Group PLC Annual Report and Accounts 2024
33
Risk management
The Board reviews the risks facing the business on a regular basis. The identified principal risks and uncertainties are
those outlined in the Strategic Report.
The Board is responsible for the Group’s system of internal controls and risk management, and for reviewing the
effectiveness of these systems. These systems are designed to manage, rather than eliminate, the risk of failure to
achieve business objectives, and to provide reasonable, but not absolute assurance against material misstatement
or loss.
The key features of the Group’s internal controls are described below:
•
clearly defined organisational structure with appropriate delegation of authority;
•
comprehensive budgeting programme with an annual budget approved by the Board;
•
regular review by the Board of actual results compared with budget and forecasts;
•
regular reviews by the Board of full year expectations;
•
detailed budgeting and monitoring of costs incurred on the development of new products;
•
a limited number of Directors and Executives authorised to commit the company to legal agreements or make
payments;
•
regular reviews of customer and employee feedback;
•
information security controls (for which the Company has obtained ISO 27001 accreditation).
The Board take measures to review internal controls and embed risk management procedures on an ongoing basis
and implement metrics and objectives to monitor the business as part of a continuous improvement programme.
Corporate culture
The Group endeavours to maintain a culture built on integrity. To surface unethical or deceitful behaviours, it pro
motes openness amongst its employees, provides channels for employees to feedback concerns to the Executive
Directors and the Board (such as anonymous employee feedback surveys, and confidential whistleblowing chan
nels), and conducts exit interviews. Further information on System1’s culture and values can be found in the Section
172 Report.
The Board of Directors
The Board comprised three Executive Directors and four independent Non-Executive Directors, including the Non-
Executive Chairman for the year ended 31 March 2024. The membership of the Board is set out in the Group Direc
tors’ Report. We believe that the directors have the mix of leadership, marketing and financial skills and experience
necessary to oversee the Group and deliver its strategy for the benefit of the shareholders over the medium to long-
term, and this mix is regularly under review as strategy develops. The composition of the Board is set out on page
37 and is intended to achieve a balanced range of personal qualities and capabilities, and to support the Company’s
commitment to promoting gender equality and diversity. The biographical details of the directors are presented
below.
The Board operates an induction programme for new Non-Executive Directors. The Board reviews its AIM obliga
tions with its Nominated Advisor annually and endeavours to keep up with best practice governance via QCA semi
nars and training material. All directors can access the Company’s advisors and obtain independent professional
advice at the Company’s expense in performance of their duties as directors.
During the year, the Remuneration Committee sought advice from external consultants on board and senior man
agement remuneration. Neither the Board nor the respective committees have sought other external advice on any
significant matter during the year. The Audit Committee works with the Company’s auditor, Haysmacintyre LLP. The
Board liaises regularly with the Company’s Nominated Advisor, Canaccord Genuity to ensure compliance with AIM
Rules.
The Board considers each of the Non-Executive Directors to be independent, for the following principal reasons:
•
they all have served on the Board for less than ten years;
•
their remuneration is not material in the context of their financial circumstances;
•
they have no executive role;
•
they each own an immaterial number of shares in the Company in the context of their financial circumstances;
•
they are not related to any of the Executive Directors; and
•
they have no material conflict of interest given their other roles and business activities.
System1 Group PLC Annual Report and Accounts 2024
34
The Board schedules regular monthly meetings during the year, except for August, and additional ad hoc meet
ings as required. All Directors can allocate sufficient time to the Group to discharge their responsibilities fully. In
recent times, we have embraced a hybrid approach to our board and committee meetings, conducting them both
virtually via Microsoft Teams as well as in person at our central London location. The number of regular meetings that
each director attended during the financial year is set out below:
Board
Audit
Remuneration
Committee
Committee
(12 meetings)
(3 meetings)
(2 meetings)
Rupert Howell
12
3
2
Sophie Tomkins
12
3
2
Phil Machray
12
3
2
Conrad Bona
12
3
2
James Gregory
12
2*
1*
John Kearon
9
-*
-*
Chris Willford
12
3*
1*
* by invitation.
Matters reserved for the Board
The Board discusses and reviews all matters and issues which are important to the business. Certain decisions are
reserved for the Board, which include:
•
approval of the Group’s long-term objectives and strategy;
•
approval of the annual operating and capital budget, and any material changes thereto;
•
extension of the Group’s activities into new business or geographic areas;
•
changes to the Group’s capital structure and/or major changes to corporate structure, including acquisitions,
disposals, and investments;
•
approval of interim and annual reports, and regulatory or non-routine shareholder communications;
•
approval of significant changes in accounting policies or practices;
•
approval of share buybacks, dividends and dividend policy;
•
assessment of the effectiveness of risk and control processes.
Matters referred to the Board are considered by the Board as a whole and no one individual has unrestricted
powers of decision. Where directors have concerns which cannot be resolved in connection with the running of the
Group or a proposed action, their concerns would be recorded in the Board Minutes. This course of action has not
been required to date.
The provisions on engagement with stakeholders including shareholders, employees and customers are dealt
within the Section 172 Report on pages 20 to 25.
Appointment of Directors
The Board formally approves the appointment of all new Directors. Each year at the Annual General Meeting, all
Directors retire by rotation and are subject to re-election.
Remuneration Committee
The Remuneration Committee is responsible for determining the specific remuneration and incentive packages for
each of the Company’s Executive Directors and keeping under review the remuneration and benefits of all senior
executives. Its members are:
Philip Machray – Chairman of the Remuneration Committee
Conrad Bona
Rupert Howell
Sophie Tomkins
Corporate Governance continued
System1 Group PLC Annual Report and Accounts 2024
35
The Remuneration Committee’s role and responsibilities are to:
•
review and approve the remuneration and incentive schemes of Executive Directors, including pension rights,
other benefits, and any compensation payments, ensuring that no Director is involved in any decisions as to their
own remuneration;
•
review and approve the level and structure of remuneration and incentive schemes for senior management;
•
select, appoint, and set the terms of reference for any remuneration consultants who advise the Committee;
•
approve the payments to Directors under any performance-related pay or share schemes operated by the Group;
•
ensure that contractual terms on termination of any Director are fair to the individual and the Group, that
•
failure is not rewarded and that the duty to mitigate loss is fully recognised;
•
approve any major changes in employee benefits structures throughout the Group;
•
approve the policy for authorising claims for expenses from the Directors.
The Remuneration Committee schedules two formal meetings per year and meets at other times as necessary.
The Remuneration Committee may invite any of the executive directors to attend meetings of the Remuneration
Committee. The Remuneration Committee may use consultants to advise it in setting remuneration structures and
policies. It is exclusively responsible for appointing such consultants and setting their terms of reference.
The Annual Statement from the Remuneration Committee Chair is set out in the Remuneration Committee Report
on page 40.
Audit Committee
The Audit Committee is responsible for ensuring the financial performance of the Group is properly monitored and
reported on to shareholders, reviewing the Group’s financial systems and controls, and overseeing the Group’s risk
management. Its members are:
Sophie Tomkins – Chair of the Audit Committee
Conrad Bona
Rupert Howell
Philip Machray
The Audit Committee’s role and responsibilities are to:
•
monitor the integrity of the financial statements of the Group;
•
review significant financial reporting matters
•
review the Group’s internal financial controls and risk management systems;
•
make recommendations to the Board, for it to put to the shareholders for their approval in relation to the appoint
ment of the external auditor and to approve appropriate remuneration and terms of reference for the external
auditor;
•
discuss the nature, extent and timing of the external auditor’s procedures and discussion of external auditor’s
findings;
•
monitor and ensure the external auditor’s independence and objectivity and the effectiveness of the audit pro
cess;
•
develop and implement policy on the engagement of the external auditor to supply non-audit services;
•
report to the Board, identifying any matters in respect of which it considers that action or improvement is required;
and
•
ensure a formal channel is available for employees and other stakeholders to express any complaints in respect
of financial accounting and reporting.
System1 Group PLC Annual Report and Accounts 2024
36
Board effectiveness
In line with best practice governance, the Group’s Senior Independent Director recently concluded the annual review
of the Chair. This involved confidential discussions with the independent Directors, to act as a sounding board for
any concerns, and to ensure that the Board is functioning optimally. The review concluded that the Board meetings
and Board matters were being run well, with all Directors given full opportunity to express views and ask questions
of the Executive, and with clear goal setting and follow up of action points.
Additionally, this year’s Board Evaluation was internally facilitated and gathered the feedback of all Directors across a
series of questions addressing the effectiveness of the Board and its Committees. It included a number of key topics
including:
•
the effectiveness of the Board in setting strategy and assessing risk;
•
the relationship between the CEO and Chair;
•
that decision making was balanced and objective and took active account of relevant stakeholder issues;
•
shareholder relations and communications;
•
that the Board was effective and responsive to new information and events; and
•
that the Board had the appropriate composition and skills to discharge its duties, and had sufficient process in
place for regular self-assessment.
Overall, the Board Evaluations have indicated that Board processes are robust, although certain areas have been
flagged as needing continued focus, notably strategy, risk review and mitigations, and succession planning. The
Board aims to meet face to face as often as possible, and continues to review practical and transparent ways of
engaging with its shareholders, particularly in light of the significant changes in the shareholding register since the
year-end.
As a result of this year’s process, a number of actions were agreed including revisiting succession planning,
review of ESG policies and effectiveness, and plans for a comprehensive Strategy Day.
The skills and experience of the Board are set out in their biographical details on page 37. The experience and
knowledge of each of the Directors gives them the ability to constructively challenge strategy and to scrutinise per
formance. The Board meets regularly with external experts including the NOMAD to ensure that it remains abreast of
developments and current best practice.
All Directors undertook a thorough induction process on joining the Board, tailored to the existing knowledge and
experience of the Director concerned.
The Group maintains communication with a wide range of stakeholders to ensure that their needs, interests and
expectations are understood and reflected within the Group’s strategy and in Board decision making. Further details
of how the Board has taken account of the needs of the Group’s stakeholders are set out on pages 20 to 25.
Succession planning
The Board, led by the Chairman, carries out ongoing assessments as to the succession needs and planning of the
Board. Senior management appointments are made by the Executive Directors, who carry out ongoing assessments
of succession needs and skills gaps across the business. Compensation arrangements for key appointments are
overseen by the Remuneration Committee.
Corporate Governance continued
System1 Group PLC Annual Report and Accounts 2024
37
The Board
Conrad Bona
Independent Non-Executive Director
Conrad joined System 1 Group in September 2022 as a Non–
Executive Director. Conrad is a business consultant, investor
and entrepreneur who started his career as a banking and fi
nance lawyer and has worked in Toronto, London and Tokyo.
He has a degree in economics from the University of Western
Ontario, law degrees from the University of Edinburgh and the
University of New Brunswick and qualified to practice as a law
yer in multiple jurisdictions. No longer practising law, Conrad
now advises companies on a wide range of commercial, finan
cial and business matters. He has both Canadian and British
citizenship and is based in London, England.
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James Gregory
Chief Executive Officer
James Joined System1 Group as Chief Operating Officer in
2021 and was appointed CEO in December 2023. Prior to join
ing System1, James worked at HomeServe Plc as Chief of Staff,
Tesco Plc as Online Director, and Capgemini Consulting. He
brings 15 years of leadership experience in strategy and trans
formation, operations and commercial management across
digital, distribution and online retail environments. Past roles
involved scaling digital businesses, initiating and leading large
scale, complex transformations, and delivering new customer
propositions.
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Rupert Howell
Independent Non-Executive Chairman
Rupert joined System1 Group in 2021 as a Non-Executive
Director and became Chairman in September 2022. He found
ed a multi-award-winning ad agency HHCL (named 1 of the
top 10 ad agencies of all time). Rupert was then CEO of Chime
Communications PLC, President EMEA of McCann Erickson,
PLC Executive Director at ITV PLC, Chairman of Matomy Media,
and Executive Director of Reach PLC. He is currently Chairman
of ROXi, a music streaming and entertainment business, and
Co-founder/Chairman of Pinwheel, the sustainable living and
planet repair app.
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John Kearon
Founder and President
John (“JK”) founded the Company in 1999 and remains its larg
est shareholder. During 20 years as CEO, JK steered System1
from a start-up to where it is today, shaking up traditional mar
ket research with fresh innovative thinking & game-changing
methods. Before System1, JK founded innovation agency,
Brand Genetics, after being Planning Director at Publicis, and
holding various research/marketing positions at Unilever.
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Philip Machray
Independent Non-Executive Director
Phil joined System1 Group in 2022 as a Non-Executive Director
and was appointed Chair of the Remuneration Committee
in December 2022. He started his career at Deloitte in 1992,
rising to Director of Assurance and Advisory. He then joined
Trinity Mirror Group, where he held a number of roles, and
became Director of Corporate Development, reporting to the
CEO, of what became Reach PLC. Since 2021, Phil has worked
at Merit Group PLC, a data and intelligence business, as Chief
Financial Officer and since January 2024 Chief Executive
Officer. Phil serves as a Non-Executive Director, and audit
committee Chair of Digitalbox, a mobile-first digital publisher
and AIM-listed company.
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Sophie Tomkins
Independent Non-Executive Director
Sophie joined the Board as Non-Executive Director in June
2018, became Audit Committee Chair in June 2019 and Senior
Independent Director in August 2021. Her career included
nearly two decades as a London-based stockbroker, focus
ing mainly on high growth small to mid-cap companies. She
started at Cazenove & Co, and became more entrepreneurial,
at both Collins Stewart, and then Fairfax. As a City Analyst, and
then Head of Equities, Sophie advised numerous companies
and Boards on a huge range of high-profile IPOs and M&A
deals. She is currently Non-Executive Director and Audit
Committee Chair of Virgin Wines UK PLC and a Non-Executive
Director of Wilmington plc. Sophie is also a qualified Char
tered Accountant.
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Chris Willford
Chief Financial Officer
Chris joined System1 Group in 2020 as Chief Financial Officer.
A Chartered Management Accountant, he built his career
with blue chip consumer businesses including Unilever, Brit
ish Airways (Group Treasurer) Barclays (Finance director of
Corporate Bank and UK Retail Bank) and Bradford & Bingley
(Group Finance Director). Prior to joining System1 in 2020,
Chris worked as a consultant with a portfolio of scale up media
and tech businesses
Favourite ad of all time: Skoda Cake
Board skills and experience
Sales and marketing
Technology
Finance
Governance
Sustainability
Conrad Bona
James Gregory
Rupert Howell
John Kearon
Phillip Machray
Sophie Tomkins
Chris Willford
System1 Group PLC Annual Report and Accounts 2024
38
The Audit Committee is responsible for ensuring that the financial performance of the Group is properly reported
and reviewed. Its role includes monitoring the integrity of the financial statements (including annual and interim
accounts and results announcements), reviewing internal control and risk management systems, reviewing any
changes to accounting policies, reviewing and monitoring the extent of the non-audit services undertaken by exter
nal auditors and advising on the appointment of external auditors.
Members of the Audit Committee
The membership of the Committee is set out on page 35 of the Corporate Governance Report. All members of the
Committee are independent Non- Executive Directors. The Chief Financial Officer routinely attends the Audit Com
mittee meetings by invitation, but other Executive Directors or members of the management team may also be
invited to attend meetings as required. The Non-Executive Directors are provided an opportunity at the Audit Com
mittee meetings to discuss matters with the Auditors without the presence of the Executive Directors.
The Board is satisfied that the Chair of the Committee has recent and relevant financial experience. Sophie is a
Chartered Accountant and is also Chair of the Audit Committee at Virgin Wines UK plc and Audit Chair Designate
at Wilmington PLC. The Committee meets at least twice a year and more frequently if required and has unrestricted
access to the Group’s auditor. Attendance at Board and Committee meetings is set out in the Corporate Governance
Report on page 34. During FY24, three formal meetings were held in addition to the meetings held as part of the
external tender process.
Duties
The main duties of the Audit Committee are set out in its terms of reference, which are summarised on page 35 and
available on the Group’s website (system1group.com/investors).
The work carried out by the Audit Committee during FY24 comprised the following:
•
ensuring the financial performance of the Group is being properly measured and reported on;
•
review of the audit plan;
•
consideration of key audit matters and how they are addressed;
•
going concern review;
•
review of suitability of the external auditor;
•
review of the financial statements and Annual Report;
•
review of the appropriateness of the Group’s accounting policies and judgements made in the preparation of the
financial statements, and adequacy of the disclosures made therein;
•
consideration of the external audit report and management representation letter;
•
review of the risk management and internal control systems;
•
meeting with the external auditor without management present;
•
review of anti-bribery policy and whistleblowing arrangements
•
Oversight of the external tender process.
Change of Auditor FY24
Following a competitive and comprehensive tender process, overseen by the Audit Committee, the Group appointed
Haysmacintyre LLP with effect from 1st December 2023.
Following the appointment, Haysmacintyre performed pre-planning, planning, and interim fieldwork in the final
quarter of FY24 in order to gain greater understanding of key systems, controls, and to assess key judgements. The
findings arising from this work, and that performed post year-end, are set out in the Audit Report on pages 45 to 52.
Role of the external auditor
The Audit Committee monitors the relationship with the external auditor to ensure that auditor independence and
objectivity are maintained. As part of this role, the Committee reviews the non-audit fees of the auditor. There were
no non-audit fees to Haysmacintyre in the year under review.
Audit Committee Report
System1 Group PLC Annual Report and Accounts 2024
Auditor Performance
The Audit Committee also assesses the auditor’s performance. The Committee has adopted a broad framework to
review the effectiveness of the Group’s external audit process and audit quality which includes: assessment of the
audit partner and team with particular focus on the lead audit engagement partner; planning and scope of the audit,
with identification of particular areas of audit risk; the planned approach and execution of the audit; management of
an effective audit process; communications by the auditors with the Committee; how the audit contributes insights
and adds value; a review of independence and objectivity of the audit firm; and the quality of the formal audit report
to shareholders. The Audit Committee recommends that Haysmacintyre be appointed as the Group’s auditor at the
next AGM.
Areas of key significance in the preparation of the financial statements
Prior to publication of this Annual Report and Accounts, the Committee reviewed the accounting policies and sig
nificant judgements and estimates underpinning the financial statements as disclosed in notes to the consolidated
financial statements.
Significant focus is placed on key accounting policies, including any judgements and estimates, which underpin
the financial statements, which include:
•
revenue recognition;
•
capitalisation and valuation of intangibles;
•
valuation of share-based payments
•
Sabbatical provision release.
Further detail on the approach to these areas can be found in Note 4 to the financial statements.
Audit process
The auditor prepares an audit plan for the review of the full period financial statements. The audit plan sets out the
scope of the audit, areas to be targeted and audit timetable. This plan is reviewed and agreed by the Audit Commit
tee. Following the audit, the auditor presents its findings to the Audit Committee for discussion. No major areas of
concern were highlighted by the auditor during the period; however, areas of significant risk and other matters of
audit relevance are regularly communicated.
Internal audit
At present the Group does not have an internal audit function and the Committee believes that management is able
to derive assurance as to the adequacy and effectiveness of internal controls and risk management procedures
without one.
Risk management and internal controls
As described throughout the Annual Report and the Corporate Governance section of the Group’s website (system
1group.com/investors), the Group has established a framework of risk management and internal control systems,
policies, and procedures. The Audit Committee is responsible for reviewing the risk management and internal con
trol framework and ensuring that it operates effectively. During the period, the Committee has reviewed the frame
work, and the Committee is satisfied that the internal control systems in place are currently operating effectively.
Whistleblowing
The Group has in place a process whereby employees can discuss concerns confidentially, including a channel of
communication directly with our non-executive Directors. The Committee is comfortable that the current policy is
operating effectively.
Anti-bribery
The Group has in place an anti-bribery and anti-corruption policy which sets out its zero-tolerance position and
provides information and guidance to those working for the Group on how to recognise and deal with bribery and
corruption issues. The Committee is comfortable that the current policy is operating effectively.
Sophie Tomkins
Chair, Audit Committee
39
System1 Group PLC Annual Report and Accounts 2024
Annual statement from the Remuneration Committee chair, Philip Machray
Dear Shareholder,
The Remuneration Committee sets the strategy, structure, and levels of remuneration for the Executive Directors and
reviews the remuneration of senior management, to ensure alignment of objectives and incentives throughout the
business in pursuit of the Group’s stated objectives. The membership and terms of reference of the Remuneration
Committee are set out in the Corporate Governance Report.
This Remuneration Report is split into two parts:
1.
The directors’ remuneration policy sets out the Company’s policy on directors’ remuneration, and the key fac-
tors that were considered in setting the policy
2. The annual report on remuneration sets out payments and awards made to the directors for the year to
31 March 2024.
There are three elements in director remuneration:
•
Base salary
•
Bonus
•
Long term incentive plan (LTIP) Benefits
The Committee regularly reviews the appropriateness of remuneration across the Group and is satisfied that an
appropriate reward structure exists below Board level to recognise and retain our top talent.
Directors’ remuneration policy
The policy described in this part of the Remuneration Report is intended to apply for three years beginning in FY23
to FY25 and covers Executive Directors and a small number of other senior managers (“Executives”).
The Remuneration Committee considers the policy annually to ensure that it remains aligned with business needs
and is appropriately positioned relative to the market. As the current LTIP matures in FY25, the remuneration com
mittee has commenced work on the design of a new scheme and expects to consult with shareholders on a new
remuneration policy in the year ahead.
The Committee has based the Executive reward structure on the long-term organic growth strategy of the busi
ness. If successful, this will deliver significant shareholder value, and Executive rewards are designed to correlate
with the key driver of that value (primarily revenue growth).
Fixed annual elements – including salary, pension, and benefits – are to recognise the responsibilities and leader
ship roles of our Executives and to ensure current and future market competitiveness. Variable elements – including
bonuses and Long-term incentives are to motivate and reward them for delivering the Group’s strategy and making
the Group successful on a sustainable basis.
The balance of variable elements, between short-term and long-term awards, is designed to focus decision mak
ing on delivering shareholder value. Whereas in FY23 the Committee judged that delivery of the Group’s long-term
growth strategy was the primary objective and no short-term awards were granted, for FY24, the Committee consid
ered that, in light of the 2022 strategic review, short-term incentives (bonuses) matched to the near-term goals of the
strategic review would be applicable to retain and reward Executives.
Base salary and benefits
FY23 and FY24: Base salary is paid in 12 equal monthly instalments during the year. Salaries are reviewed annually,
and any changes are effective from the beginning of the Group’s financial year (which is 1st April). Benefits comprise
money purchase pension contributions of up to 6% of salary, private medical and dental insurance, life insurance and
long-term disability insurance.
Bonuses
FY23: Participants in the 2021 LTIP did not participate in the Company’s annual bonus or profit share scheme and had
no other short-term incentive plans. Therefore, over the period to March 2023, the only remuneration received was
base salary and benefits.
FY24: Executives earned cash bonuses for exceeding annual targets. Targets were set such that no bonus accrued
until Adjusted Profit before Taxation (= Profit before Taxation and Share-Based Payments) exceeded the budgeted
performance for that measure. In view of the exceptional performance during FY24, with profit before taxation up by
40
Remuneration Committee Report
System1 Group PLC Annual Report and Accounts 2024
over 4x on FY23, and progress made towards delivering the long-term strategy, the Committee decided to remove
the originally proposed 50% of salary cap on the FY24 bonus for Executive Directors.
Further, in recognition of the CEO’s exceptional performance during the year, and mindful that no additional LTIP
awards have been made to him since appointment to the role, the Remuneration Committee intends to additionally
award nil-costs share options to him in July 2024, in an amount equivalent to his FY24 annual bonus. These awards
will vest in April 2026 if he remains in office at that time. This award is intended to both reward and retain in a manner
aligned with shareholder value.
The long-term incentive plan
The Company introduced the current 2021 LTIP in October 2021. It was approved by shareholders at the Annual
General Meeting on 13 August 2021 and covers the period ending 31 March 2025. The 2021 LTIP was implemented in
October 2021 as a modification to the 2019 LTIP.
Under the approved modified scheme, the 2021 LTIP features the following:
•
The awards have taken the form of zero-cost stock options.
•
The overall plan limit is 10% of issued ordinary share capital as at 1 January 2017.
•
New awards can be granted up to 22 March 2025
•
The award has 4 tranches of vesting dates on 12 August 2022 to 2025 with a hard end-date for exercise of 21 March
2027.
•
The market conditions underpinning these options are an average daily closing mid-price of the Company’s
shares must be at least £4.00 during the month of July (excluding weekends) of the relevant year when vesting
occurs. If the share price target is not met, the award will roll onto the next date of vesting, except in the final year
of the LTIP.
•
Non-market performance conditions: If for the financial year immediately preceding the year of Vesting, Adjusted
Profit After Tax is greater than £0 and subject to the Remuneration Committee considering and being satisfied
with the level of profitability for the financial year immediately preceding the year of Vesting and the overall cor
porate and share price performance since 31 March 2021:
a) all of the award will vest if revenue is equal to or greater than the Stretch Target;
b) one-third of the award will vest if revenue is equal to the Threshold Target;
c) a proportionate amount of the award will vest on a straight-line basis if revenue is between the Threshold
Target and the Stretch Target (between one-third and all of the award).
•
The Threshold Target means revenue of £45m in the Company’s financial year ending 31 March and represents the
minimum level of revenue that must be achieved for any vesting to occur. This means that 50% revenue growth is
required in FY25 for any vesting to occur under the 2021 LTIP and accordingly no charge has been recognised in
FY24 as the probability of this being achieved has been assessed as low.
•
The Stretch Target means revenue of £88m in the Company’s financial year ending 31 March and represents the
minimum level of revenue that must be achieved for full vesting to occur.
At 31 March 2024, the number of options granted under the 2021 LTIP reached 1,185,139 (or 9.0% of issued ordi
nary share capital of maximum capacity at 10%).
At 31 March 2024, there were three Executive Director participants in the 2021 LTIP (James Gregory, John Kearon
and Chris Willford) and six senior manager participants. The specific vesting levels are set out as follows:
Equity level shares
No.
Of issued shares
Revenue target
Executive Directors
154,311
1.2%
£45.0m
Threshold
308,623
2.3%
£88.0m
Stretch
462,934
3.5%
Senior Managers
198,401
1.5%
£45.0m
Threshold
396,802
3.0%
£88.0m
Stretch
595,203
4.5%
41
System1 Group PLC Annual Report and Accounts 2024
42
Non-employee plan
In April 2019, the Committee granted Stefan Barden, then an advisor to the Board, a separate equity award, originally
comprising 300,000 zero-cost stock options in three tranches of 100,000, with the following performance condi
tions: In October 2021, the non-employee plan was modified to reflect the same targets as the 2021 LTIP scheme.
As at 31 March 2024, Stefan Barden retained 46,995 of his Tranche 1 options, with the remaining 253,005 options
cancelled.
Dilution
Vested stock options are set out as follows:
No.
%
Voting shares as at 31 March 2024
12,678,929
100%
2010-2014 LTIP – vested on 28 May 2014 (closed)
10,144
0.1%
10,144
0.1%
Unvested options comprise options granted under the 2019 and 2021 LTIP schemes, and the Non- Employee Plan,
all described above. The maximum aggregate dilution under these schemes is 9.4% of the Company’s voting shares.
Non-Executive Directors
Non-Executive Directors do not participate in any of the Company’s incentive arrangements, nor do they receive any
benefits. Their fees are reviewed periodically and set by the Board as a whole.
Remuneration of all employees
All employees are entitled to base salary, benefits, and a discretionary annual bonus or commissions. Since January
2012, equity awards have not been granted to employees who are not also members of executive management.
Director service contracts and policy on payment for loss of office
All the Executive Directors have service contracts. The agreements include restrictive covenants which apply during
employment and for a period of 6 months after termination. All the Executive Directors’ service contracts can be
terminated on six months’ notice in writing by either the Company or the director.
Annual report on remuneration
Remuneration for Executive Directors
Payment
Back-dated
in lieu of
Salary
salary*
pension
Bonus
Benefits
Pension
Total
Year ended 31 March 2024 (audited)
£
£
£
£
£
£
£
James Gregory
262,500
26,167
-
158,041
222
19,840
466,770
John Kearon
190,000
-
158,041
4,644
8,081
360,766
Chris Willford
210,000
12,600
158,041
4,940
-
385,581
Total
662,500
26,167
12,600
474,123
9,806
27,921
1,213,117
*Included with remuneration is an element of salary contractually agreed in April 2023 in respect of services rendered from 6 December 2022 (appointment
as Chief Executive Officer) to 31 March 2023.
Payment
Back-dated
in lieu of
Salary
salary*
pension
Bonus
Benefits
Pension
Total
Year ended 31 March 2023 (audited)
£
£
£
£
£
£
£
James Gregory
57,973
-
-
-
-
3,899
61,872
John Kearon
265,000
-
-
-
6,622
-
271,622
Chris Willford
210,000
-
12,600
-
5,943
-
228,543
Total
532,973
-
12,600
-
12,565
3,899
562,037
Remuneration Committee Report continued
System1 Group PLC Annual Report and Accounts 2024
43
This Annual report on Remuneration discloses the highest paid director in the year.
Directors’ interests
The Directors who held office at 31 March 2024 held the following shares in the Company as at that date:
No
No.
John Kearon
2,818,235
22.2%
Chris Willford
33,666
0.3%
Conrad Bona
26,407
0.2%
James Gregory
15,384
0.1%
Philip Machray
15,380
0.1%
Rupert Howell
10,000
0.1%
Sophie Tomkins
8,000
0.1%
Directors’ interests in options over shares and conditional shares of the Company are shown below.
Date
Earliest
Exercise
No. at
Exercised
Cancelled
No. at
of grant
exercise date
price
1 Apr 2023
in year
in year
31 Mar 2024
James Gregory
27/10/2021
12/08/2022
0.0p
132,267
-
-
132,267
John Kearon
04/09/2019
12/08/2022
0.0p
198,400
-
-
198,400
Chris Willford
27/11/2020
12/08/2022
0.0P
132,267
-
-
132,267
Options and conditional shares granted under the 2019 LTIP and modified in 2021, as described in the Directors’ remuneration policy. These modified
options can vest at any time between 12 August 2022 and 12 August 2025, provided performance and market targets are met.
There were no equity awards or vesting of options other than under the LTIP as set out in the directors’ remunera
tion policy.
Fees for Non-Executive Directors (audited)
The Non-Executive Directors received fees, but no other benefits, as follows.
2024
2023
£
£
Conrad Bona (appointed 1 September 2022)
38,000
22,167
Graham Blashill (resigned 28 September 2022)
-
21,000
Jane Wakely (resigned 15 July 2022)
-
11,108
Philip Machray
39,849
32,772
Rupert Howell
42,000
40,000
Sophie Tomkins
40,000
40,000
159,849 167,047
Philip Machray
Chair, Remuneration Committee
Independent Auditors’ Report
System1 Group PLC Annual Report and Accounts 2024
45
Independent Auditors’ Report
to the Members of System1 Group PLC
Opinion
We have audited the financial statements of System1 Group PLC (the ‘parent company’) and its subsidiaries (the
‘group’) for the year ended 31 March 2024 which comprise:
Group
Company
the Consolidated Statement of Comprehensive Income; the Company Statement of Changes in Equity;
the Consolidated Statement of Changes in Equity;
the Company Balance Sheet;
the Consolidated Balance Sheet;
and related notes to the financial statements
the Consolidated Statement of Cash flows;
and related notes to the financial statements
The financial reporting framework that has been applied in the preparation of the group financial statements is
applicable law and UK-adopted International Financial Reporting Standards (IFRSs). The financial reporting frame
work that has been applied in the preparation of the parent company financial statements is applicable law and
United Kingdom Accounting Standards, including Financial Reporting Standard 101 “Reduced Disclosure Frame
work” (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
•
give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2024 and of
the group’s profit for the period then ended;
•
have been properly prepared in accordance with UK adopted IFRSs;
•
the parent company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report.
We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
An overview of the scope of our audit
The Group consists of 13 components, located in various geographical territories. All components are trading apart
from System1 Agency Limited and System1 AdRatings Limited, which are dormant. Three UK components, System1
Research Limited, System1 Agency Limited and System1 AdRatings Limited are exempt from statutory audit require
ments but audit work on these was performed to component level materiality where considered appropriate.
The scope of the audit and our audit strategy was developed by using our audit planning process to obtain an
understanding of the Group, its activities, its internal control environment, current, and where relevant to our audit,
likely future developments.
Our audit testing was informed by this understanding of the Group and accordingly was designed to focus on
areas where we assessed there to be the most significant risks of material misstatement.
Audit work to respond to the assessed risks was performed directly by the audit engagement team who per
formed full scope audit procedures on the Parent Company and the Group as a whole.
Our audit planning and risk assessment identified 5 components (one of which was System1 Group PLC, the
Parent company) which were categorised as full scope audits. The remaining components were deemed to be out of
scope (analytical review components), however it was decided as part of our group scoping that we would perform
specific audit procedures over revenue across all components to achieve 100% coverage of this balance. Further
information around these procedures is disclosed within the key audit matters section of this report.
System1 Group PLC Annual Report and Accounts 2024
46
The below graphs summarise the monetary cover
age achieved through our audit procedures:
Conclusions relating to going concern
In auditing the financial statements, we have con
cluded that the directors’ use of the going concern
basis of accounting in the preparation of the financial
statements is appropriate.
Our evaluation of the directors’ assessment of the
group’s ability to continue to adopt the going concern
basis of accounting included:
•
Discussing management’s assessment of the
group’s ability to remain a going concern;
•
Reviewing and understanding the cash flow forecasts for the period to end of July 2025 which are the central ele
ment of management’s going concern assessment;
•
Assessing and challenging the inputs in and judgements made in the preparation of the cash flow forecasts for
the period to end of July 2025; and
•
Performing stress tests including sensitivity analysis to model the effect of changing assumptions made or
amending key data used in management’s cash flow forecasts and considering the impact on the group’s ability
to adopt the going concern basis.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the group's ability to continue as a going
concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on:
•
the overall audit strategy,
•
the allocation of resources in the audit; and
•
directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
In determining the key audit matters we considered the:
•
Areas of higher risks of material misstatement or significant risks identified in accordance with ISA (UK) 315
•
Significant audit judgements on financial statement line items that involved significant management judgement
such as accounting estimates, and
•
The impact of significant events and transactions during the period covered by the audit.
Independent Auditors’ Report
to the Members of System1 Group PLC continued
Revenue
Net assets
Full Scope
Analytical Review
84%
16%
89%
11%
System1 Group PLC Annual Report and Accounts 2024
47
The following table summarises the key audit matters we have identified and rationale for their identification
together we how we responded to each in our audit and our key observations. The table also shows how our judge
ment of the magnitude of each risk has changed since the previous audit.
Revenue recognition (Group)
Key audit matter
The Group’s revenue recognition policy is included within the accounting policy in
Note 5 of the financial statements.
During the year ended 31 March 2024, the Group have recognised revenues of
£30,019k (2023: £23,410k). The Group recognises revenue largely at the point in
time at which the final written debrief becomes available to the customer. This is
deemed by management to be the point at which the performance obligations are
satisfied, and control is transferred to the customer.
The application of the five-step model of IFRS 15, in particular determining
whether a contract exists with a customer, and the determination of whether the per
formance obligations included in such contract have been satisfied, involves judge
ment. Revenue is also deemed to be a key metric to users of the financial statement,
As a result, this was deemed to be an area of high importance in the Group audit, and
was therefore determined to be a key audit matter.
How we addressed the
key audit matter in the
audit
In response to this risk, our work consisted of, but was not limited to, the following
audit procedures in respect of all full scope components:
•
We gained an understanding of key processes and controls relating to the reve
nue process and revenue recognition, through the documentation of walkthrough
procedures for each material revenue stream to assess the design and implemen
tation of controls;
•
We assessed the Group’s s accounting policy for each revenue stream with refer
ence to the five-step model of IFRS 15, “Revenue from Contracts with Customers”;
•
We performed a substantive review over the occurrence of revenue through rec
onciling cash receipts in the period to the nominal ledger;
•
We performed test of details for transactions In March 2024 and April 2024,
obtaining evidence to demonstrate the performance obligations were satisfied in
the period in which the transaction had been recognised;
•
Using Data Analytical procedures, we performed a review of entries posted to
revenue accounts in the period to determine entries which did not follow the
expected flow of transactions.
In addition to the above procedures performed over the full scope components,
we also performed substantive analytical review procedures in respect of all other
out of scope components, providing 100% coverage over the Group’s revenue as at
the 31 March 2024.
System1 Group PLC Annual Report and Accounts 2024
48
Capitalisation of development costs (Group and Parent company)
Key audit matter
Application of IAS 38
As at 31 March 2024, the Group and Parent company had development costs with
carrying value of £1,437k (2023: £1,124k). During the period, the Group and Parent
company capitalised development costs of £736k (2023: £1,225k), which have been
recognised as intangible asset additions. All intangible asset additions recognised
for the year ending 31 March 2024 relate to the Supply Chain Automation platform.
Management capitalise development cost when the project is deemed to have
met all criteria of IAS 38 – Development costs. The process in determining when a
project meet all these criteria involves management judgement and estimation.
The costs capitalised consist of both directly attributable staff costs and invoiced
consultant costs. Estimates are made in determining the proportion of staff costs to
be capitalised in respect of development cost additions in the period.
How we addressed the
key audit matter in the
audit
In response to this risk, our work consisted of, but was not limited to, the following
audit procedures:
Application of IAS 38
•
We obtained management’s development cost capitalisation policy and assessed
the policy with reference to the capitalisation requirements of IAS 38.
•
We performed a reconciliation of the intangible fixed asset register between the
prior year and current year financial statements.
•
For a sample of current year additions, we performed substantive procedures to
verify the balance of costs capitalised during the period. We critically assessed
the percentage of staff costs capitalised for the sample of additions.
•
We discussed the current year project for which costs were capitalised with indi
viduals outside of the finance department to understand the commercial ratio
nale and justification of this particular project.
System1 Group PLC Annual Report and Accounts 2024
Independent Auditors’ Report
to the Members of System1 Group PLC continued
Capitalisation of development costs (Group and Parent company) continued
Key audit matter
Impairment of intangibles assets and capitalised development costs
The impairment of intangible assets, namely those relating to capitalised develop
ment costs, has been identified as an area of significant risk, with overstatement
due to fraud or error considered to be high. The carrying value of capitalised devel
opment costs as at 31 March 2024 is £1,437k (2023: £1,124k). Given the size of the
balance with reference to materiality, there is a risk that this balance is materially
overstated.
Management performed impairment assessments for capitalised development
costs in accordance with IAS 36 ‘Impairment of Assets’ on a project level. The impair
ment reviews were performed through a ‘Value in Use’ calculation, considering either
the incremental cashflows or cost-savings relating to the project for which the costs
were capitalised.
Management impairment reviews are areas that carry risks of error or fraud due to
the degree of estimation uncertainty included in forecasting and discounting future
cash flows, due to the assumptions made in relation to growth rates, the applicable
discount rate and other inputs included with management’s model. The impact of
this is that the recoverable amount of capitalised development costs carries a high
degree of estimation uncertainty and a potential range of reasonable outcomes
greater than materiality for the financial statements.
How we addressed the
key audit matter in the
audit
Impairment of intangibles assets and capitalised development costs
•
We obtained management’s impairment assessment and critically analysed the
inputs in the model and the forecasts for future revenues of projects for which
development costs have been capitalised.
•
We benchmarked the key inputs used within management’s model to external
sources and internal projects to determine the appropriateness of such assump
tions.
•
We compared historic forecasts against actuals to determine the accuracy of
forecasts as well as performing sensitivity analysis on future forecasts to deter
mine the impact on headroom within the model.
System1 Group PLC Annual Report and Accounts 2024
49
Risk Areas
Likelihood
Magnitude
Error in revenue recognition
cut-off
Fraud in revenue
recognition
Capitalisation
of development costs
Management override
of controls
Our application of materiality
The scope and focus of our audit were influenced by our assessment and application of materiality. We define mate
riality as the magnitude of misstatement that could reasonably be expected to influence the readers and the eco
nomic decisions of the users of the financial statements. We use materiality to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually
and on the financial statements as a whole.
System1 Group PLC Annual Report and Accounts 2024
50
Independent Auditors’ Report
to the Members of System1 Group PLC continued
Group Financial Statements
Materiality
£278,000
Benchmark
Materiality for the Group was determined to be 1% of total forecast Group revenues
for the period, based on the point at which we performed our audit planning and risk
assessment.
Revenue is a key metric to management and users of the financial statements, and
as such was deemed the most appropriate benchmark for determining materiality.
We also considered other important metrics in determining materiality for the
Group, and the chosen revenue materiality fell within the acceptable range for these
alternative metrics, including EBITDA and Net Profit.
Whilst Group revenues finished higher than the initial expectation, we elected to
not adjustment Group materiality to reflect 1% of actual Group revenues. Our materi
ality therefore reflected 0.9% of Group revenues.
Basis for, and judgements
used in the determination
of materiality
Revenue is a key metric to management and users of the financial statements, and as
such was deemed the most appropriate benchmark for determining materiality. The
Group’s long term strategic plans highlight a focus on revenue growth.
We also considered other important metrics in determining materiality for the
Group, such as profit based metrics, and the chosen revenue materiality fell within
the acceptable range for these alternative metrics.
Parent Company Financial Statements
Materiality
£98,700
Benchmark
Materiality for the Parent company was determined to be 1% of total assets. The
Parent company is a holding company for investments in subsidiaries, intercompany
balances and intangible assets, and as such total assets is deemed to be an impor
tant metric to users of the Parent company financial statements.
Basis for, and judgements
used in the determination
of materiality
The Parent company is a holding company for investments in subsidiaries, intercom
pany balances and intangible assets, and as such total assets is deemed to be an
important metric to users of the Parent company financial statements.
Performance materiality – Based on our risk assessment and our review of the Group’s control environment, perfor
mance materiality was set at 65% of materiality, being £181,000. A percentage of 65% was used to reflect that that
this is our first year of appointment as auditors of the Group’s financial statements. We typically set performance
materiality between 50% and 75% of materiality.
Performance materiality for the Parent company was set at 65% of materiality being £64,200.
System1 Group PLC Annual Report and Accounts 2024
51
Reporting threshold – The reporting threshold to the
audit committee was set as 5% of materiality, being
£13,900.
Reporting threshold for the Parent company was set
at 5% of materiality, being £4,940.
Other information
The directors are responsible for the other informa
tion. The other information comprises the information
included in the annual report, other than the finan
cial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the
other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements, or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material incon
sistencies or apparent material misstatements, we are required to determine whether there is a material misstate
ment in the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the strategic report and the directors’ report for the financial period for which the finan
cial statements are prepared is consistent with the financial statements; and
•
the strategic report and the directors’ report have been prepared in accordance with applicable legal require
ments.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained
in the course of the audit, we have not identified material misstatements in the strategic report or the directors’
report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires
us to report to you if, in our opinion:
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent
company or to cease operations, or have no realistic alternative but to do so.
Overall Materiality – Group
Revenue
£30,019,000
Group
materiality
£278,000
Performance
materiality
£180,000
Reporting
threshold
£13,900
System1 Group PLC Annual Report and Accounts 2024
52
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Rea
sonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, includ
ing fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed
below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged
with governance of the Group and management.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Based on our understanding of the company and industry, we identified that the principal risks of non-compliance
with laws and regulations related to regulatory requirements in respect of employment law, including but not limited
to minimum wage regulation, and food standards requirements. We considered the extent to which non-compliance
might have a material effect on the financial statements. We also considered those laws and regulations that have a
direct impact on the preparation of the financial statements such as the Companies Act 2006, payroll tax and sales
tax.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements
(including the risk of override of controls) and determined that the principal risks were related to posting inappropri
ate manual journal entries to revenue and the risk of management bias in accounting estimates. Audit procedures
performed by the engagement team included:
•
Discussions with management including consideration of known or suspected instances of non-compliance with
laws and regulation and fraud;
•
The evaluation of management’s controls designed to prevent and detect irregularities;
•
The identification and review of manual journals, in particular journal entries which shared key risk characteristics;
and
•
The review and challenge of assumptions, estimates and judgements made by management in their recognition
of accounting estimates.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including
those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk
increases the more that compliance with a law or regulation is removed from the events and transactions reflected
in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also
greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s
report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Com
panies Act 2006. Our audit work has been undertaken so that we might state to the company's members those mat
ters we are required to state to them in an Auditor's report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the company and the company's members
as a body, for our audit work, for this report, or for the opinions we have formed.
Jon Dawson (Senior Statutory Auditor)
For and on behalf of Haysmacintyre LLP, Statutory Auditors
10 Queen Street Place
London EC4R 1AG
3 July 2024
Independent Auditors’ Report
to the Members of System1 Group PLC continued
Financial Report
System1 Group PLC Annual Report and Accounts 2024
54
Consolidated Income Statement
for the year ended 31 March 2024
2024
2023
Note
£’000
£’000
Restated
Revenue
6
30,019
23,410
Cost of sales
17
(3,898)
(3,692)
Gross profit
26,121
19,718
Administrative expenses
17
(23,434)
(18,929)
Other operating income
18
413
49
Operating profit
3,100
838
Finance income
21
44
17
Finance expense
21
(35)
(136)
Profit before taxation
22
3,109
719
Income tax (expense)/credit
22
(1,076)
(315)
Profit for the financial period
2,033
404
Attributable to the equity holders of the Company
2,033
404
Earnings per share attributable to
equity holders of the Company
Basic earnings per share
24
16.0p
3.2p
Diluted earnings per share
24
16.0p
3.2p
The notes on page 59 to 82 are an integral part of these consolidated financial statements.
All of the activities of the Group are classed as continuing.
System1 Group PLC Annual Report and Accounts 2024
2024
2023
£’000
£’000
Profit for the financial year
2,033
404
Other comprehensive income:
Items that may be subsequently reclassified to profit/(loss)
Currency translation differences on translating foreign operations
(72)
227
Other comprehensive income for the period, net of tax
(72)
227
Total comprehensive income for the period attributable
to equity holders of the Company
1,961
631
The notes on pages 59 to 82 are an integral part of these consolidated financial statements.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2024
55
System1 Group PLC Annual Report and Accounts 2024
56
2024
2023
Note
£’000
£’000
Assets
Non-current assets
Property, plant, and equipment
7
225
813
Intangible assets
8
1,578
1,396
Finance lease receivable
10
-
93
Deferred tax asset
23
151
203
1,954
2,505
Current assets
Contract assets
180
102
Finance lease receivable
10
85
256
Trade and other receivables
11
7,261
6,344
Income tax receivables
-
55
Cash and cash equivalents
9
9,610
5,719
17,136
12,476
Total assets
19,090
14,981
Equity
Attributable to equity holders of the Company
Share capital
12
132
132
Share premium account
1,601
1,601
Merger reserve
477
477
Foreign currency translation reserve
351
423
Retained earnings
5
8,007
5,974
Total equity
10,568
8,607
Liabilities
Non-current liabilities
Provisions
13
-
353
Lease liabilities
16
66
362
66
715
Current liabilities
Provisions
13
6
101
Lease liabilities
16
280
1,094
Contract liabilities
15
1,137
764
Income taxes payable
470
-
Trade and other payables
14
6,563
3,700
8,456
5,659
Total liabilities
8,522
6,374
Total equity and liabilities
19,090
14,981
The notes on pages 59 to 82 are an integral part of these consolidated financial statements.
These financial statements were approved by the directors on 3 July 2024 and are signed on their behalf by:
James Gregory
Chris Willford
Director
Director
REGISTERED COMPANY NO. 05940040
Consolidated Balance Sheet
as at 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
Consolidated Statement of Cash Flows
for the year ended 31 March 2024
2024
2023
Note
£’000
£’000
Net cash generated/(used in) from operations
26
6,430
(87)
Tax paid
(499)
(541)
Net cash generated/(used in) from operating activities
5,931
(628)
Cash flows from investing activities
Purchases of property, plant, and equipment
7
(97)
(30)
Purchase of intangible assets
8
(736)
(1,225)
Net cash used by investing activities
(833)
(1,225)
Net cash flow before financing activities
5,098
(1,883)
Cash flows from financing activities
Interest received
36
-
Interest paid
(35)
(136)
Property lease liability payments
(1,121)
(1,053)
Purchase of own shares
12
-
(134)
Repayment of borrowings
-
(2,500)
Net cash used by financing activities
(1,120)
(3,823)
Net increase/(decrease) in cash and cash equivalents
3,978
(5,706)
Cash and cash equivalents at beginning of year
5,719
11,174
Exchange gain/(loss) on cash and equivalents
(87)
251
Cash and cash equivalents at end of year
9,610
5,719
Office lease costs are not included within “Net cash flow before financing activities” (the Company’s key cash flow performance indicator).
“Net cash flow before financing activities”, adjusted for office leases, known by the Company as “Operating cash flow” is shown below:
2024
2023
£’000
£’000
Net cash flow before financing activities
5,098
(1,883)
Net cash flow for property leases
(1,156)
(1,116)
Operating cash flow
3,942
(2,999)
Consolidated Movements in Net Cash and Financing Activities
Cash and
cash
Lease
equivalents
Borrowings
liabilities
Total
£’000
£’000
£’000
£’000
At 1 April 2022
11,174
(2,500)
(2,508)
6,166
Cash flows
(5,706)
2,500
1,116
(2,090)
Non-cash charges:
- Interest on lease liabilities
-
-
(64)
(64)
- Exchange and other non-cash movements
251
-
-
251
At 31 March 2023
5,719
-
(1,456)
4,263
At 1 April 2023
5,719
-
(1,456)
4,263
Cash flows
3,978
-
1,156
5,134
Non-cash charges:
- Interest on lease liabilities
-
-
(34)
(34)
- New lease liabilities
-
-
(175)
(175)
- Disposal of lease liabilities
163
163
- Exchange and other non-cash movements
(87)
-
41
(87)
At 31 March 2024
9,610
-
(346)
9,264
The notes on pages 59 to 82 are an integral part of these consolidated financial statements.
57
System1 Group PLC Annual Report and Accounts 2024
58
Foreign
Share
currency
Share
premium
Merger
translation
Retained
capital
account
reserve
reserve
earnings
Total
Note
£’000
£’000
£’000
£’000
£’000
£’000
At 31 March 2022
132
1,601
477
196
5,857
8,263
Profit for the financial year
-
-
-
-
404
404
Other comprehensive income:
- currency translation differences
-
-
-
227
-
227
Total comprehensive income
-
-
-
227
404
631
Transactions with owners:
Employee share options:
- value of employee services
10
-
-
-
-
(153)
(153)
Purchase of treasury shares
-
-
-
-
(134)
(134)
At 31 March 2023
132
1,601
477
423
5,974
8,607
Profit for the financial year
-
-
-
-
2,033
2,033
Other comprehensive income:
- currency translation differences
-
-
-
(72)
-
(72)
Total comprehensive income
-
-
-
(72)
2,033
1,961
Transactions with owners:
Employee share options:
- value of employee services
10
-
-
-
-
-
-
At 31 March 2024
132
1,601
477
351
8,007
10,568
The notes on pages 59 to 82 are an integral part of these consolidated financial statements.
Consolidated Statement of Changes in Equity
for the year ended ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
1 General information
System1 Group PLC (the “Company”) was incorporated on 19 September 2006 in the United Kingdom. The Com
pany’s principal operating subsidiary, System1 Research Limited, was at that time already established, having been
incorporated on 29 December 1999. The address of the Company’s registered office is 4 More London Riverside,
London, England, SE1 2AU. The Company’s shares are listed on the AIM Market of the London Stock Exchange (“AIM”).
The Company and its subsidiaries (together the “Group”) provide market research data and insight services. The
Chief Executive’s Statement and the Financial Review provide further detail of the Group’s operations and principal
activities.
2 Basis of preparation
The Group has prepared its consolidated financial statements in accordance with UK-adopted international account
ing standards and applicable law. The consolidated financial statements have been prepared under the historical
cost convention.
The preparation of financial statements in accordance with UK-adopted international accounting standards
(“UK-adopted IFRS”) requires the use of certain critical accounting estimates. It also requires management to exer
cise its judgement in the process of applying the Group’s accounting policies. The critical accounting judgements
and estimates applied in the preparation of the consolidated financial statements are disclosed in Note 5.
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (“the Functional Currency”). The consolidated financial
statements are presented in Pounds Sterling (GBP), which is the Company’s functional and presentation currency.
The financial statements are presented in round thousands unless otherwise stated.
3 Prior period restatement
During the year ended 31 March 2024 the Group determined that the sublease of its former New York office, previ
ously accounted for as a right-of-use asset, should have been presented as a finance lease receivable. The following
table summarises the impact of the prior period reclassification on the financial statements of the Group. There is no
impact on basic or diluted earnings per share.
Consolidated income statement
As previously
Restated
presented
£’000
£’000
Administrative expenses
18,929
19,203
Other income
49
340
Finance income
17
-
Increase/(decrease) in profit for the year
-
-
Consolidated balance sheet
As previously
Restated
presented
£’000
£’000
Property, plant and equipment
813
1,162
Finance lease receivable – non-current
93
-
Finance lease receivable - current
256
-
Increase/(decrease) in net assets
-
-
4 Going concern
The Group has prepared its financial statements on a going concern basis.
As noted in the Financial Review, cash balances and cash flow are healthy, and we will continue to invest in our
products, data assets and talent. We ended the year with a cash balance and net cash of £9.6m and net assets at
£10.6m (31 March 2023: £5.7m and £8.6m respectively).
The Group has reviewed its financial forecasts for the 12 months from the approval of these financial statements,
flexing sensitivity analysis scenarios with external and internal inputs that would represent the Group’s forecast and
various downturn scenarios. Our internal assessment of a reasonable worst-case scenario shows that, in the face of a
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024
59
System1 Group PLC Annual Report and Accounts 2024
60
4 Going concern continued
striking negative downturn on System1’s immediate capacity to function, management would respond appropriately
by reducing our costs as soon as possible.
The Group is very confident in its ability to respond to an abrupt negative situation, whatever the cause. Our miti
gating factors involve an active review cycle of the Group’s performance. The Board reviews the performance of the
Group monthly, and senior management has a weekly assessment of sales revenue and gross profit. The Group also
reviews its profit forecasts on a monthly basis.
The Group is confident that our strong balance sheet position, in particular the cash balance, will be able to sus
tain the Group reasonably until July 2025 and beyond.
5 Principal accounting policies
The principal accounting policies adopted are consistent with those of the financial statements for the year ended
31 March 2023.
Standards, amendments and interpretations in issue but not yet effective
The Group adopted the following new pronouncements during the year ended 31 March 2024, which did not have a
material impact on the Group’s financial statements:
•
IAS 1: Classifications of Liabilities as Current or Non-Current (effective for periods commencing on or after
1 January 2023)
•
IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies (effective for periods commencing on or
after 1 January 2023)
•
IAS 8: Definition of Accounting Estimates (effective for periods commencing on or after 1 January 2023)
•
IAS 12: Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction (effective for periods com
mencing on or after 1 January 2023)
The following standards and amendments, issued before 31 March 2024 with an effective date on or after 1 April
2024, have not been early adopted by the Group, they do not have a material impact on the Group’s financial state
ments:
•
Amendment to IFRS 16 – Leases on sale and leaseback (effective for periods commencing on or after 1 January
2024)
•
Amendment to IAS 1 – Non-current liabilities with covenants (effective for periods commencing on or after
1 January 2024)
•
Amendment to IAS 7 and IFRS 7 – Supplier finance (effective for periods commencing on or after 1 January 2024)
Basis of consolidation
The Group financial statements consolidate those of the Company and all its subsidiary undertakings drawn up to
31 March 2024.
Subsidiaries are all entities over which the Group has power over the subsidiary, i.e. the Group has existing rights
that give it the ability to direct the relevant activities (the activities that significantly affect the subsidiary’s returns),
exposure or rights, to variable returns from its involvement with the subsidiary and the ability to use its power over
the subsidiary to affect the amount of the subsidiary’s returns.
The Group obtains and exercises control through voting rights.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered
when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are de-consolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred,
and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or
liability resulting from a contingent consideration arrangement. Acquisition related costs are expensed as incurred.
Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date.
On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at
fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of
the identifiable net assets acquired is recorded as goodwill.
Notes to the Consolidated Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
5 Principal accounting policies continued
All intra-group transactions and balances are eliminated on consolidation. Unrealised gains on transactions
between the Group and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of sub
sidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the
Group.
Property, plant and equipment
Property, plant, and equipment are stated at historical cost less accumulated depreciation and accumulated impair
ment losses. Depreciation is provided to write off the cost of all property, plant, and equipment to its residual value
on a straight-line basis over their expected useful economic lives, which are as follows:
Furniture, fittings and equipment
5 years
Computer hardware
3 to 4 years
The residual value and useful life of each asset is reviewed and adjusted, if appropriate, at each balance sheet
date.
Depreciation on all property, plant and equipment is charged to administrative expenses.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost,
which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or
before the commencement date net of any lease incentives received, any initial direct costs incurred, and an esti
mate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or
asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated
useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset
at the end of the lease term, the depreciation is over its estimated useful life. The Group had no such lease arrange
ments for the years ended 31 March 2024 or 2023.
Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities to reflect the
actual and expected effect of exercising extension and termination options in lease arrangements.
Depreciation on all right-of-use assets is charged to administrative expenses.
Finance lease receivables
Amounts due from lessees under finance leases are recognised as receivables at the amount of the group’s net
investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic
rate of return on the group’s net investment outstanding in respect of the leases.
Subsequent to initial recognition, the group regularly reviews the estimated unguaranteed residual value and
applies the impairment requirements of IFRS 9, recognising an allowance for expected credit losses on the lease
receivables.
Finance lease income is calculated with reference to the gross carrying amount of the lease receivables, except
for credit-impaired financial assets for which interest income is calculated with reference to their amortised cost (i.e.
after a deduction of the loss allowance).
Intangible assets
Software
Costs incurred in the development of identifiable and unique software products controlled by the Group, and that
will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets.
Costs include professional fees and directly attributable employee costs required to bring the software into work
ing condition. Non-attributable costs are expensed under the relevant income statement heading.
Research and development – internally generated intangible assets
All on-going research expenditure is expensed in the year in which it is incurred. Where no internally generated
intangible asset can be recognised, development expenditure is charged to administrative expenses in the period
in which it is incurred.
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62
5 Principal accounting policies continued
Furthermore, internally generated software and product development costs are recognised as an intangible asset
only if the Group can demonstrate all the following conditions:
a) the technical feasibility of completing the intangible asset so that it will be available for use or sale;
b) its intention to complete the intangible asset and use or sell it;
c) Its ability to use or sell the intangible asset;
d) how the intangible asset will generate probable future economic benefits; and among other things, the Group
can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself
or, if it is to be used internally, the usefulness of the intangible asset;
e) the availability of adequate technical, financial, and other resources to complete the development and to use
or sell the intangible asset;
f)
its ability to measure reliably the expenditure attributable to the intangible asset during its development.
Amortisation
Intangible assets are amortised on a straight-line basis over their expected useful economic lives, which are as fol
lows:
Computer software licenses
5 years
Capitalised development costs
3 years
Amortisation on all intangible assets is charged to administrative expenses.
Impairment of property, plant and equipment, right-of-use assets and intangible assets
At each balance sheet date, the Group reviews the carrying amount of its property, plant and equipment and intan
gible assets for any indication that those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated to determine the extent of the impairment loss, if any. Intangible assets
not available for use are tested for impairment on at least an annual basis. The recoverable amount is the higher of
the fair value less costs to sell and value in use. Cash flows for the determination of value in use are derived from
either the incremental contribution attributable to the specific assets or from cost savings arising from the use of
the specific assets.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and bank deposits available on demand.
Contract assets
Contract costs comprise directly attributable external costs incurred in fulfilling customer contracts that relate to
incomplete market research projects. The Group assesses at each balance sheet date whether there is objective evi
dence that contract cost assets are impaired, and provision is made when there is evidence that the Group will not
be able to recover all costs incurred under the terms of the customer contract.
Income taxes
Current income tax liabilities comprise those obligations to fiscal authorities relating to the current or prior report
ing period, which are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws
that have been enacted or substantively enacted at the reporting date applicable to the fiscal periods to which they
relate, based on the taxable profit for the year.
All changes to current tax assets or liabilities are recognised as a component of tax expense in the income state
ment, except where they relate to items charged or credited to other comprehensive income or directly to equity.
Deferred income taxes are calculated using the liability method on temporary differences. This involves the com
parison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective
tax bases. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are
assessed for recognition as deferred tax assets, by reference to the probable recovery of those losses against future
taxable profits.
Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it
is probable that the underlying deductible temporary differences will be able to be offset against future taxable
income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply
to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet
date. Deferred tax is recognised as a component of tax expense in the income statement, except where it relates to
items charged or credited to other comprehensive income or directly to equity.
Notes to the Consolidated Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
5 Principal accounting policies continued
Revenue recognition
The Group’s revenues are primarily derived from the delivery of research services. Revenue from the Group’s research
product lines (Platform Revenues and Other Consultancy services) arise from contracts with customers within the
scope of IFRS 15 ‘Revenue from Contracts with Customers’ and are recognised on the same basis, as set out below.
Revenue is recognised at a point in time (rather than over time) as the key performance obligation is the delivery
of the final written debrief to the customer. The only exception to this is where subscriptions are sold for access to
our Test Your Ad database, where revenue is recognised on a straight line basis across the period of the subscription.
Revenue is recognised only after the results or final written debrief has been delivered to the customer, except on
the rare occasion that a large project straddles a financial period end, and that project can be sub-divided into sepa
rate discrete deliverables; in such circumstances revenue is recognised on delivery of each separate deliverable, and
the transaction price is allocated across the discrete performance obligations by reference to the standalone price
for the separate services. Where a contract with a customer requires a purchase order, signed schedule of work or
similar document to evidence the right to consideration, revenue is not recognised until the Group receives these
documents.
There are no elements of variable consideration in the contracts entered into by the Group. Revenue is measured
by reference to the fair value of consideration receivable, excluding sales taxes, discounts and volume rebates.
Other operating income
On 27 September 2021, the Company filed a complaint for trademark infringement, unfair competition and decep
tive trade practices at the United States District Court Southern District of New York against System1 LLC (“LLC”),
since renamed System1 Inc., an omnichannel customer acquisition marketing provider, over their infringing use of
the mark “SYSTEM1”. On 30 June 2023 the Company announced that a settlement had been reached with LLC. The
parties have signed a global agreement which governs the co-existence of their respective use of the “System1”
mark in connection with their operations. As part of this agreement, the Company is receiving a fixed undisclosed
payment payable in instalments. Amounts received under this arrangement are included within other income.
During the prior year, the Group partnered with the University of Warwick on UK government grant-funded
research looking to harness artificial intelligence (AI) and our proprietary databases to further improve our under
standing of predictions. The grant was specific to this research and was not a part of the Group’s usual operations.
Cost of sales
Cost of sales includes external costs attributable to customer projects. For the research business, these include
respondent sample, data processing, language translation and similar costs.
Employee benefits
All accumulating employee-compensated absences that are unused at the balance sheet date are recognised as a
liability. The Group operates several defined contribution pension plans. The Group pays contributions to these plans
based upon the contractual terms agreed with each employee.
The Group has no further payment obligations once the contributions have been paid. The contributions are rec
ognised as employee benefit expense when they are due, and any outstanding amounts due at the reporting date
are recognised within accruals.
Share-based payment transactions
The Group issues equity-settled share-based compensation to certain employees (including directors). Equity-set
tled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date
of the equity-settled share-based payment is expensed on a straight-line basis over the vesting period, together with
a corresponding increase in equity, based upon the Group’s estimate of the shares that will eventually vest.
Apart from market-based elements of awards, these estimates are subsequently revised if there is any indica
tion that the number of options expected to vest differs from previous estimates. Any cumulative adjustment prior
to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods.
The fair value of option awards with time vesting performance conditions are measured at the date of grant using a
Black-Scholes based Option Valuation model. The expected life used in the model has been adjusted, based on man
agement’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
The fair value of awards made with market-based performance conditions (for example, the entity’s share price)
are measured at the grant date using a Monte Carlo simulation method incorporating the market conditions in the
63
System1 Group PLC Annual Report and Accounts 2024
64
5 Principal accounting policies continued
calculations. The awards made in respect of the Group’s long-term incentive scheme have been measured using
such a method. At the end of each reporting period, an assessment is made in respect of any non-market conditions
with regard to likely vesting, and the estimate is adjusted prospectively as required.
Social security contributions payable in connection with the grant of share options are considered integral to the
grant itself, and the charge is treated as a cash-settled transaction.
Earnings per share
Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the company by the
weighted average number of ordinary shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares.
Provisions
Provisions for sabbatical leave and dilapidations are recognised when:
a) the Group has a legal or constructive obligation because of past events;
b) it is probable that an outflow of resources will be required to settle the obligation; and
c) the amount has been reliably estimated. Where material, the increase in provisions due to passage of time
is recognised as interest expense. The provision for sabbatical leave is measured using the projected unit
credit method. The provision for dilapidations is measured at the present value of expenditures expected to
be required to settle those obligations.
During the year ended 31 March 2024, the Company ceased to operate the sabbatical provision in its entirety, with
no previously eligible individuals entitled to any further paid leave under the scheme or any alternate compensation.
Accordingly, the provision has been released in full.
Foreign currencies
Transactions in foreign currencies are translated into the functional currency at the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses arising from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised in the Income Statement.
The results and financial position of all Group companies that have a functional currency different from the pre
sentation currency are translated into the presentation currency as follows:
a) assets and liabilities for each balance sheet presented are translated at the closing rate at the balance sheet
date;
b) income and expenses for each income statement are translated at average exchange rates; and
c) all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations
are recognised in other comprehensive income. When a foreign operation is partially disposed of or sold, exchange
differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the main decision-
making body of the Company and Group, which collectively comprises the Executive Directors. The Executive Direc
tors are responsible for allocating resources and assessing performance of the operating segments.
Financial instruments
Financial assets
The Group’s financial assets comprise trade and other receivables held at amortised cost. The Group does not pos
sess assets held at fair value through profit or loss. The classification is determined by management at initial recogni
tion, being dependent upon the business model and the contractual cash flows of the assets.
Financial assets are derecognised when the rights to receive cash flows from the investments have expired or
have been transferred and the Group has transferred substantially all risks and rewards of ownership. Financial assets
arising from contracts with customers are separately presented in accordance with IFRS 15 in the Consolidated
Balance Sheet.
Notes to the Consolidated Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
5 Principal accounting policies continued
Trade and other receivables
Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. The Group’s amortised cost financial assets comprise trade and other receivables and
cash and cash equivalents in the Consolidated Balance Sheet.
Trade receivables are initially recorded at fair value, but subsequently at amortised cost using the effective inter
est rate method. In accordance with IFRS 9, the Group assesses on a forward-looking basis the expected credit
losses associated with its financial assets at amortised cost. The Group applies the simplified model to recognise life
time expected credit losses for its trade and other receivables by making an accounting policy election. The Group
assesses expected credit losses based on the ageing of the receivable, the Group's historical experience adjusted
for forward looking information, and informed credit assessment. The amount of the write-down is determined as the
difference between the asset’s carrying amount and the present value of estimated future cash flows.
Financial liabilities
Financial liabilities are initially recognised at fair value, net of transaction costs, and subsequently carried at amor
tised cost using the effective interest rate method. Financial liabilities arising from contracts with customers are
separately presented in accordance with IFRS 15 in the Consolidated Balance Sheet. Financial liabilities and equity
instruments are classified according to the substance of the contractual arrangements entered. An equity instrument
is any contract that evidences a residual interest in the assets of the entity after deducting all its financial liabilities.
Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt
instrument, those financial instruments are classed as financial liabilities.
Financial liabilities are presented as such in the Consolidated Balance Sheet. Finance costs and gains or losses
relating to financial liabilities are included in the income statement.
Finance costs are calculated to produce a constant rate of return on the outstanding liability. Where the contrac
tual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as
an equity instrument. Dividends and distributions relating to equity instruments are debited directly to equity.
Accrued income and contract liabilities
Accrued income is recognised when a performance obligation has been satisfied but has not yet been billed.
Accrued income is transferred to receivables when the right to consideration is unconditional and billed per the
terms of the contractual agreement. The Group is generally paid in arrears for its services and invoices are typically
payable within 120 days. In certain cases, payments are received from customers prior to satisfaction of performance
obligations and recognised as deferred income. These balances are considered contract liabilities. There is no sig
nificant passage of time between the receipt of funds from a customer and the delivery of services, or between the
delivery of services to a customer and the receipt of funds when payment is in arrears. The Group does not enter
contractual arrangements with significant financing components.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the
present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit
in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease
payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on
an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option
when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The vari
able lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate
used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liabil
ity is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying
amount of the right-of-use asset is fully written down.
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System1 Group PLC Annual Report and Accounts 2024
66
5 Principal accounting policies continued
Share capital
Ordinary shares are classified as equity. Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
Share premium
Share premium represents the excess over nominal value of the fair value of consideration received for equity shares,
net of direct expenses of the share issue.
Merger reserve
The merger reserve represents the difference between the parent company’s cost of investment and a subsidiary’s
share capital and share premium. The merger reserve in these accounts has arisen from a group reconstruction upon
the incorporation and listing of the parent company that was accounted for as a common control transaction.
Common control transactions are accounted for using merger accounting rather than the acquisition method,
where this reflects the substance of the transaction.
Foreign currency translation reserve
The foreign currency translation reserve represents the differences arising from translation of investments in over
seas subsidiaries.
Treasury shares
Where the Company purchases the Company’s equity share capital, the consideration paid is deducted from the
total shareholders’ equity and classified as treasury shares until they are cancelled. Where such shares are sub
sequently sold or re-issued, any consideration received is included in total shareholders’ equity. No gain or loss is
recognised on the purchase, sale, issue, or cancellation of the Company’s own equity instruments.
Significant accounting estimates and judgements
The preparation of the consolidated financial statements requires the Directors and management to make judge
ments and estimates in respect of certain items where the choice of accounting policy and assumptions applied in
determining the judgement or estimate could materially affect the Group’s financial position or results at the report
ing date.
Capitalisation of development costs - judgement
The point at which development costs meet the criteria for capitalisation is critically dependent on management’s
judgement of the point at which technical feasibility is demonstrable. Furthermore, the useful economic lives of
capitalised development costs are based on management’s knowledge of the life cycle of the Group’s products and
technology. The carrying value of development assets also depends on management’s ability to demonstrate the
future economic benefits they will deliver. This judgement requires assumptions about factors outside the business’s
control such as short and medium term economic conditions, technological developments and market changes.
Details are contained in note 8.
Impairment of development costs – judgement and estimate
The Group tests annually whether intangible assets, have been impaired by reference to expected future generation
of cash from the relevant platforms incorporating the technologies and methodologies developed. In estimating
the cash flows the capitalised development costs may generate the directors make judgements, based on budgets
and forecasts, about the amount of future profits from the relevant products that will be generated and the timing of
when these will be realised. Furthermore, where new technology is acquired through an acquisition, management
consider the impact this could have on the carrying value of existing technology, that is similar in nature, when pre
paring the budgets and forecasts. The Group has carried out an impairment review and determined no impairment is
required in the year ended 31 March 2024 (31 March 2023: £nil). Details are contained in note 8.
Notes to the Consolidated Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
5 Principal accounting policies continued
Share-based payments – judgement and estimate
The fair value of options granted under the long-term incentive scheme is determined using Monte Carlo simulation
models. The models require several estimates and assumptions. The significant inputs into the models are share
price at grant date, exercise price, historic exercise multiples, expected volatility and the risk-free rate. Volatility is
measured at the standard deviation of expected share price returns based on statistical analysis of historical share
prices. These inputs are provided in Note 12.
In previous years, the Company has sometimes purchased shares arising from the exercise of share options to
minimise shareholder dilution and create shareholder value. IFRS 2 does not provide guidance on the application of
‘substance over form’ when evaluating whether a share-based payment should be accounted for as equity or cash
settled.
To determine whether the Company’s share options are equity or cash-settled, consideration needs to be given
as to whether the settlement of the share options through the issue and subsequent repurchase of treasury shares
should be treated as one transaction or as two distinct transactions, and whether the Company has an obligation to
settle in cash.
The Company does not publicise to option holders that option shares may be repurchased, the decision to repur
chase option shares is only made at the point of option exercise, and there is no contractual or other obligation to
settle in cash. Therefore, it is appropriate to treat the exercise of options and repurchase of option shares as two
separate transactions and account for the option exercise as equity-settled rather than cash-settled.
In the past the Company has on occasion cash-settled part of long-term incentive plan equity awards. Despite the
repurchase of these equity interests the Company did not have an obligation to do so and does not have an obliga
tion, constructive or otherwise to do so in the future. As a result, the Company continues to account for share-based
payments related to its long-term incentive plans as equity rather than cash-settled.
The 2021 LTIP is subject to Revenue, Profit After Tax and the Company’s share price exceeding certain targets;
the full details of which are given in the Company’s Remuneration Report. The measure of the share-based payment
charge is dependent on the estimates made in respect of the probability of those targets being achieved over the
vesting period of the options. The key inputs into those estimates are the Company’s forecasts, revenue volatility and
inflation. Revenue volatility is determined by reference to the share price volatility used to determine the fair value
of the options (with an assumption that the two will have a high level of correlation). Inflation is determined by refer
ence to the Bank of England data for the UK in March and April 2024. Non-market vesting conditions are assessed by
reference to the Group’s latest forecasts.
Employee benefits – estimate
The Company has historically operated a sabbatical leave scheme, which provided 20 days paid leave for each suc
cessive period of six years’ service. There was no proportional entitlement for shorter periods of service. During the
year ended 31 March 2023, the Company modified the terms of the scheme such that rather than being open to all
employees, the scheme was only available to those individuals who had accrued three or more years of unbroken
service as at 30 September 2022. During the year ended 31 March 2024, the Company ceased to operate the sab
batical provision in its entirety, with no previously eligible individuals entitled to any further paid leave under the
scheme or any alternate compensation. Accordingly, the provision has been released in full. The significant inputs
into the model were previously rate of salary growth and average staff turnover as explained in Note 13.
Leases – estimate and judgement
Management exercises judgement in determining the likelihood of exercising break or extension options in deter
mining the lease term, and reviews this on a lease-by-lease basis.
The discount rate used to calculate the lease liability is the rate implicit in the lease, if it can be readily determined,
or the lessee’s incremental borrowing rate if not. Incremental borrowing rates are determined based on the term,
country, currency and start date of the lease, to derive the rate of interest that the lessee would have to pay to borrow
over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-
of-use asset in a similar economic environment. Details of lease liabilities can be found in note 16.
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System1 Group PLC Annual Report and Accounts 2024
68
6 Segment information
The financial performance of the Group’s geographic operating units (“Reportable Segments”) is set out below.* The
Group defines its Consultancy business as a Research and Advertising Agency.
2024
2023
Revenue
Revenue
Restated**
£’000
£’000
By location of customer
USA
8,625
7,078
LatAm
2,446
2,350
United Kingdom
12,694
8,895
Rest of Europe
4,815
3,741
APAC
1,439
1,346
30,019
23,410
*Segmental revenue is revenue generated from external customers and so excludes intercompany revenue and is
attributable to geographical areas based upon the location in which the service is delivered.
**Segment revenues have been restated to present USA and LatAm as separate business units, consistent with
the information presented to the Executive Directors.
2024
2023
Revenue
Revenue
£’000
£’000
By product type
Predict Your (data)
19,776
14,060
Improve Your (data-led consultancy)
5,005
3,311
Standard (platform) revenue
24,781
17,371
Other consultancy (non-platform)
5,238
6,039
Total revenue
30,019
23,410
By product group
Communications (Ad Testing)
22,775
15,879
Brand (Brand Tracking)
3,178
3,669
Innovation
4,066
3,862
30,019
23,410
Consolidated balance sheet information is regularly provided to the Executive Directors while segment balance
sheet information is not. Accordingly, the Company does not disclose segmental balance sheet information here.
The Company is domiciled in the UK, its consolidated non-current assets, other than financial instruments and
deferred tax assets are as follows:
2024
2023
£’000
£’000
Non-Current Assets
United Kingdom
1,643
2,204
Rest of world
160
5
1,803
2,209
Notes to the Consolidated Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
7 Property, plant and equipment
Right-of-use
Furniture and
Computer
assets
fixtures
hardware
Total
Restated
£’000
£’000
£’000
£’000
Cost at 1 April 2022
2,798
33
192
3,023
Additions
-
-
30
30
Disposals
(1,554)
(22)
(18)
(1,594)
Foreign exchange
-
-
2
2
Cost at 31 March 2023
1,244
11
206
1,461
Depreciation at 1 April 2022
1,400
29
113
1,542
Depreciation charge for the year
620
3
76
699
Disposals
(1,554)
(22)
(18)
(1,594)
Foreign exchange
-
-
1
1
Depreciation at 31 March 2023
466
10
172
648
Carrying amount 31 March 2023
778
1
34
813
Cost at 1 April 2023
1,244
11
206
1,461
Additions
175
-
97
272
Disposals
(1,245)
(11)
-
(1,256)
Foreign exchange
(2)
-
-
(2)
Cost at 31 March 2024
172
-
303
475
Depreciation at 1 April 2023
466
10
172
648
Depreciation charge for the year
645
1
56
702
Disposals
(1,089)
(11)
-
(1,100)
Foreign exchange
2
-
(2)
-
Depreciation at 31 March 2024
24
-
226
250
Carrying amount 31 March 2024
148
-
77
225
Depreciation charges are included within administrative expenses.
8 Intangible assets
Development
costs
Software
Total
£’000
£’000
£’000
Cost at 1 April 2022
-
525
525
Additions
1,225
-
1,225
Cost at 31 March 2023
1,225
525
1,750
Amortisation at 1 April 2022
-
143
143
Amortisation for the year
101
110
211
Amortisation at 31 March 2023
101
253
354
Carrying value at 31 March 2023
1,124
272
1,396
Cost at 1 April 2023
1,225
525
1,750
Additions
736
-
736
Cost at 31 March 2024
1,961
525
2,486
Amortisation at 1 April 2023
101
253
354
Amortisation for the year
423
131
554
Amortisation at 31 March 2024
524
384
908
Carrying value at 31 March 2024
1,437
141
1,578
Amortisation charges are included within administrative expenses.
69
System1 Group PLC Annual Report and Accounts 2024
70
The only software cost as at 31 March 2024 is the Group’s finance and operations system that was brought into
use October 2020.
Development costs relate to costs capitalised for the development of the “Test Your” platform (carrying value
£464k; 2023: £865k), which completed during the year ended 31 March 2023, and the Supply Chain Automation
platform (carrying value £930k; 2023: £259k), which enables System1 to interface (via API) with multiple suppliers
of panel respondents, was substantially completed at the end of the year ended 31 March 2024. Development costs
in respect of completed projects are tested for impairment where impairment indicators exist. No indicators exist at
31 March 2024 (31 March 2023: none). Development costs in respect of ongoing projects are tested for impairment
at each reporting date. The carrying value of the assets in each case are assigned to their respective cash generat
ing units for the purposes of assessing future cashflows. The principal assumptions used in the forecasts were the
timing and amount of future revenues and cost savings, which were derived from the latest forecasts approved by
the Board. Following the assessment, the Board have determined that no impairment of assets is required as at 31
March 2024 (31 March 2023: £nil). The headroom in the impairment review exceeds the carrying value of the asset.
9 Financial risk management
The Group’s financial risk management policies and objectives are explained in the Group Directors’ report.
Credit risk
The Group reviews and manages credit risk, arising from trade receivables and cash and cash equivalents, on a con
solidated basis. The vast majority of the Group’s customers are large blue-chip organisations, and the Group has only
ever suffered minimal bad debts. The Group has concentrations of credit risk as follows.
2024
2023
£’000
£’000
Cash and cash equivalents
HSBC Bank PLC (AA credit rating)
8,588
5,190
Santander
828
349
Deutsche Bank
50
38
UBS
144
142
Other banks
-
-
9,610
5,719
At 31 March 2024, the Group has cash balances of £40,000 (2023: £42,000) which are not readily available for
use due to ongoing restrictions imposed by overseas banking institutions. The Group has made full provision against
these balances at the year end.
Market risk – foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the US dollar and the Euro. The Group considers foreign exchange risk to be one of its
financial risks and may seek to minimise its effects by using forward foreign exchange contracts where appropriate.
During 2023 and 2024, the Group did not enter into any forward foreign exchange contracts.
The denominations of the cash and cash equivalents held by the Group were as follows:
2024
2023
£’000
£’000
Cash and cash equivalents
GBP
1,076
1,926
USD
4,367
1,503
EUR
2,285
1,404
CHF
553
250
AUD
496
249
SGD
6
38
BRL
827
349
9,610
5,719
Notes to the Consolidated Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
9 Financial risk management continued
Financial instruments by category
At the balance sheet date, the Group held the following financial instruments by category.
2024
2023
£’000
£’000
Financial assets carried at amortised cost
Finance lease receivables
85
348
Trade and other receivables (excluding prepayments)
6,380
5,918
Cash and cash equivalents
9,610
5,719
16,075
11,985
Other financial liabilities carried at amortised cost
Current liabilities
Trade payables
2,051
1,595
Accruals
3,880
1,676
Lease liabilities
280
1,094
6,211
4,365
Non-current liabilities
Lease liabilities
66
362
66
362
On 22 February 2023, the Company entered into an Overdraft Facility with HSBC. The facility of up to £1,500,000
is secured over the Company’s trade receivables, and incurs interest at 3% above the Bank of England base rate on
drawn balances. The facility has no fixed end date and can be cancelled by either party at any time. During the year
ended 31 March 2024, the Company has not drawn any amounts under the facility, and no amounts have been drawn
to the date of the signing of these financial statements (amounts drawn in the year ended 31 March 2023: £nil).
10 Finance lease receivables
2024
2023
£’000
£’000
Amounts receivable under finance leases
Year 1
94
284
Year 2
-
94
Total undiscounted lease payments
94
378
Unearned finance income
(9)
(29)
Net investment in lease
85
349
2024
2023
£’000
£’000
Net investment in the lease analysed as:
Recoverable after 12 months
-
93
Recoverable within 12 months
85
256
85
349
Finance lease receivables relate to the sublease of the Group’s previous office in New York, which expires in July
2024. There are no variable payments within the lease arrangement. At each reporting date the Group estimates the
loss allowance on finance lease receivables. No amounts were past due at 31 March 2023 or 2024, and the Group
consider that the finance lease receivable is not impaired.
71
System1 Group PLC Annual Report and Accounts 2024
72
11 Trade and other receivables
2024
2023
£’000
£’000
Trade receivables
6,126
5,694
Prepayments and accrued income
899
426
Other receivables
236
224
7,261
6,344
Trade and other receivables are due within one year and are not interest bearing. The maximum exposure to credit
risk at the balance sheet date is the carrying amount of receivables (detailed in Note 8). The Group does not hold any
collateral as security against trade receivables. The Directors do not believe that there is a significant concentration
of credit risk within the trade receivables balance.
Impairment of financial assets
The Group has financial assets, primarily trade receivables, which are subject to the IFRS 9 expected credit loss
model, and the Group is required to assess these assets for expected credit losses. The Group has applied the sim
plified approach to measuring expected credit losses as permitted by IFRS 9 and recognises a loss allowance based
on the financial assets’ lifetime expected loss.
The Group assesses on a forward-looking basis, the expected credit losses associated with its debt instruments
carried at amortised cost. assessment. Trade receivables are grouped for the purposes of the assessment based on
industry sector, entity size and geography. The Group assesses expected credit losses based on the ageing of the
receivable, the Group's historical experience and informed credit Further credit losses are recognised where the
Group has information that indicates it is unlikely to recover balances in full.
The Group has no financial assets designated as measured at fair value.
As of 31 March 2024, trade receivables of £3,937,000 (2023: £1,733,000) were past due but not impaired. The
ageing of trade receivables, and the associated loss allowance, is as follows:
0-3 months
3-6 months
Over 6 months
Current
due
due
due
Total
£’000
£’000
£’000
£’000
£’000
At 31 March 2024
Gross trade receivables
2,208
3,540
287
171
6,206
Loss provision
19
38
3
20
80
Expected loss rate
1%
1%
1%
12%
At 31 March 2023
Gross trade receivables
4,007
1,260
403
200
5,870
Loss provision
46
24
15
91
176
Expected loss rate
1%
2%
4%
45%
Movements in the impairment allowance for trade receivables are as follows:
2024
2023
£’000
£’000
Provision for impairment of trade receivables
Opening balance
176
110
Charged to the income statement
(68)
101
Utilisations and other movements
(28)
(35)
80
176
As of 31 March 2024, no other receivables or contract costs were impaired (2023: £Nil).
Notes to the Consolidated Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
11 Trade and other receivables continued
The carrying amount of the Group’s trade and other receivables are denominated in the following currencies.
2024
2023
£’000
£’000
United States dollar
1,924
1,916
British sterling
3,990
2,607
Euro
547
744
Brazilian real
240
574
Swiss franc
231
233
Australian dollar
152
129
Singapore dollar
177
141
7,261
6,344
12 Share capital
The share capital of System1 Group PLC consists only of fully paid Ordinary Shares (“Shares”) with a par value of one
penny each. All Shares are equally eligible to receive dividends and the repayment of capital and represent one vote
at the Annual General Meeting.
2024
2023
No.
£’000
No.
£’000
Allotted, called up, and fully paid ordinary shares At 1 April and at 31 March
13,226,773
132
13,226,773
132
The Company has treasury shares to satisfy the requirements of the Group’s share incentive schemes. The move
ment in the Company’s treasury shares balance is as follows:
2024
2023
Weighted
Weighted
average
average
Treasury
exercise price
Treasury
exercise price
shares
per share
shares
per share
No.
Pence
No.
Pence
Shares held by Treasury
At 1 April
547,844
487,151
Purchase of treasury shares
-
60,693
Transfer of shares to satisfy options exercise
-
-
-
-
At 31 March
547,844
547,844
Share options
Employee share option scheme
The Group issues share options to directors and senior managers under an HM Revenue and Customs approved
Enterprise Management Incentive (EMI) scheme and under an unapproved scheme.
Options granted in more recent years have been awarded in accordance with management long-term incentive
plans and such options have a zero-exercise price and are subject to performance criteria. If share options remain
unexercised after a period of ten years from the date of grant, the options expire. Share options are forfeited in
some circumstances if the employee leaves the Group before the options vest, unless otherwise agreed by the
Remuneration Committee of the Board.
73
System1 Group PLC Annual Report and Accounts 2024
74
12 Share capital continued
Movements in the number of share options outstanding and their related weighted average exercise prices are
as follows:
2024
2023
Weighted
Weighted
average
average
exercise price
exercise price
Options
per share
Options
per share
No.
Pence
No.
Pence
Share options outstanding
Opening balance
1,260,724
0.7
1,194,590
0.8
Granted
-
- 198,401
-
Lapsed
(7,000)
-
-
-
Replaced
-
-
(132,267)
-
Closing balance
1,253,724
-
1,260,724
0.7
Exercisable at year-end
10,144
0.0
17,144
53.7
Weighted average share price at date of options exercised (pence)
NA
NA
Weighted average fair value of options granted in the year (pence)
0.0
43.3
The Group had the following outstanding options and exercise prices:
2024
2023
Weighted
Weighted
Weighted
Weighted
average
average
average
average
exercise price
remaining
exercise price
remaining
Options
per share
contractual life
Options
per share
contractual life
Expiry date
No.
Pence
Months
No.
Pence
Months
2024
57,139
-
3.6
64,139
14.4
14.9
2025
-
-
-
-
- -
2027
1,196,585
-
29.8
1,196,585
-
39.8
2028
-
-
-
-
-
-
2029
-
-
-
-
-
-
2032
-
-
-
-
-
-
1,253,724
0.0
28.6
1,260,724
0.7
38.5
Long term incentive scheme
The Company introduced the current 2021 LTIP in October 2021. The 2021 LTIP was implemented in October 2021 as
a modification to the 2019 LTIP. The 2021 LTIP options vest between 12 August 2022 and 12 August 2025, subject to
Revenue, Profit After Tax and the Company’s share price exceeding certain targets. The full details of which are given
in the Company’s Remuneration Report. The final vesting date of the 2021 LTIP is 12 August 2025, with the exercise
period ending on 21 March 2027.
At 31 March 2024, the number of options granted under the 2021 LTIP reached 1,130,959 or 8.6% of issued ordi
nary share capital of maximum capacity at 10% (2023: 1,130,959 or 8.6% of issued ordinary share capital).
The key inputs into the fair value measurement of the 198,401 options granted in the year ended 31 March 2023 are
as follows:
•
Expected Life: 2 years and 7.5 months
•
Exercise price: £Nil
•
Share price at date of grant: £1.45
•
Expected volatility: 53.52%
•
Risk free rate: 3.51%
No new option grants were made in the year ended 31 March 2024.
The number of options outstanding under the replaced 2019 LTIP scheme is 54,180 (31 March 2023: 54,180). No
charge has been recognised in the year as a consequence of management’s assessment that the probability of non-
market performance conditions being fulfilled is low.
Notes to the Consolidated Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
12 Share capital continued
Non-employee option plan
On 17 April 2019, the Company granted Stefan Barden who was then an advisor to the Board, an equity award com
prising 300,000 zero cost options. In the year ended 31 March 2022, the plan was modified to reflect the same tar
gets as the 2021 LTIP scheme. As at 31 March 2024, Stefan Barden retained 46,995 of his options, with the remaining
253,005 options cancelled following his resignation in 2022.
Share-based payment charge
The total charge relating to equity-settled share-based payment plans was £nil (2023: credit of £153,000); as a con
sequence of management’s assessment that the probability of non-market performance conditions being fulfilled is
low. The associated charge for social security was £nil. (2023: credit of 28,000).
13 Provisions
Leasehold
Sabbatical
dilapidations
Total
£’000
£’000
£’000
At 1 April 2022
475
34
509
Provided in the year
75
-
75
Utilised in the year
(58)
-
(58)
Reversals of unused amounts
(73)
-
(73)
Foreign exchange movement
-
1
1
At 31 March 2023
419 35 454
Provided in the year
81 -
81
Utilised in the year
(52) -
(52)
Reversals of unused amounts
(446)
(28) (474)
Foreign exchange movement
(2) (1)
(3)
At 31 March 2024
-
6
6
Due within one year
- 6
6
Due after one year
- -
-
The Company has historically operated a sabbatical leave scheme, which provided 20 days paid leave for each
successive period of six years’ service. There was no proportional entitlement for shorter periods of service. During
the year ended 31 March 2023, the Company modified the terms of the scheme such that rather than being open to
all employees, the scheme was only available to those individuals who had accrued three or more years of unbroken
service as at 30 September 2022. During the year ended 31 March 2024, the Company ceased to operate the sab
batical provision in its entirety, with no previously eligible individuals entitled to any further paid leave under the
scheme or any alternate compensation. Accordingly, the provision has been released in full.
The assumptions previously used in the valuation of the sabbatical provision is as follows:
2024
2023
Measurement method
Project unit credit method
Discount rate, based on 6-year corporate bond yields*
NA
5.0%
Annual salary growth rate
NA
7%
Staff turnover
NA
14%
*The discount rate for the UK has been disclosed, as this accounts for nearly 70% of the total provision.
Dilapidation provisions represent the Group’s best estimate of costs required to meet its obligations under prop
erty lease agreements.
75
System1 Group PLC Annual Report and Accounts 2024
76
14 Trade and other payables
2024
2023
£’000
£’000
Trade payables
2,051
1,595
Social security and other taxes
632
429
Accruals
3.880
1,676
6,563
3,700
Trade and other payables are due within one year and are not interest bearing. The contractual terms for the pay
ment of trade payables are generally 30-45 days from receipt of invoice.
The contractual maturity of all trade and other payables is within one year of the balance sheet date.
15 Contract liabilities
2024
2023
£’000
£’000
Contract liabilities
1,137
764
From time to time, payments are received from customers prior to work being completed. Such payments are
recorded in the balance sheet as contract liabilities.
Included within Revenue is £536,000 relating to contract liabilities recognised at 1 April 2023 (2022: £816,000).
No revenue has been recognised in the year from performance conditions satisfied, or partially satisfied in previous
periods.
16 Borrowings
The analysis of the maturity of lease liabilities is as follows:
2024
2023
£’000
£’000
Within one year
291
1,031
Later than 1 but no later than 5 years
68
457
More than 5 years
-
-
Total contractual undiscounted cashflows
359
1,488
Impact of discounting
(13)
(32)
Total lease liabilities
346
1,456
Lease liabilities are presented in the Consolidated Balance Sheet as follows:
2024
2023
£’000
£’000
Within one year
280
1,094
Later than 1 but no later than 5 years
66
362
More than 5 years
-
-
346
1,456
There are no contingent payments, purchase options or restrictive covenants in respect of property leases. Details
of loan facilities and balances are given in note 9.
Notes to the Consolidated Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
17 Expenses by nature
2024
2023
£’000
£’000
Restated*
Employee benefit expense**
15,712
12,916
Other research and development costs
1,302
1,602
Capitalised development costs – gross of amortisation
(736)
(1,225)
Depreciation, amortisation, and impairment
1,249
910
Net foreign exchange (gains)/losses
204
(183)
Lease expense related to short term leases
195
199
Third party direct costs (sample, translation, data processing)
3,898
3,692
Indirect delivery costs
858
769
Other expenses
4,650
3,941
27,332
22,621
Analysed as:
Cost of sales
3,898
3,692
Administrative expenses
23,434
18,929
27,332
22,621
*The disaggregation of expenses has been amended in the current year to align the presentation with figures reported to management. Accordingly, the
comparatives for the year ended 31 March 2023 have been reclassified.
**Included within employee benefit expense is £1,811,000 of costs related to staff involved in research and development activities (2023: £2,341,000)
which has not been capitalised under IAS 38.
18 Other income
2024
2023
£’000
£’000
Other income
413
49
413
49
Other operating income includes amounts in relation to the trademark co-existence agreement. See note 27 for
further details.
19 Auditor remuneration
2024
2023
£’000
£’000
Audit of parent company and consolidated accounts
110
117
Audit-related assurance services
-
14
110
131
77
System1 Group PLC Annual Report and Accounts 2024
78
20 Employee benefit expense
2024
2023
£’000
£’000
Employee benefit expenses (including directors) comprise:
Wages and salaries
13,327
10,784
Social security contributions and similar taxes
1,788
1,437
Defined contribution pension cost
453
458
Long service leave cost – sabbatical provision
(417)
(61)
Share-based payment expense
-
(153)
Compensation for loss of office
87
39
Medical benefits
474
412
15,712
12,916
Key management personnel are those persons having authority and responsibility for planning, directing, and
controlling the activities of the Group, including the 3 (2023: 3) Executive Directors of the company. Details of direc
tors’ emoluments are given in the Remuneration Report on pages 42 and 43.
Compensation to key management is set out as follows:
2024
2023
£’000
£’000
Salaries and benefits in kind
871
725
Bonus
474
-
Social security contributions
175
93
Defined contribution pension cost
28
4
Share-based payment (credit)/expense
41
(30)
1,589
792
The average number of full-time equivalent staff employed by the Group during the financial year was as follows:
2024
2024
£’000
£’000
Sales and marketing
46
48
Operations
44
43
IT
31
37
Administration
23
23
144
151
21 Finance charges
2024
2023
£’000
£’000
Interest on finance lease receivables
8
17
Interest on bank deposits
36
-
Finance income
44
17
2024
2023
£’000
£’000
Interest on bank loans
-
(72)
Other net interest payable
(1)
-
Interest on lease liabilities
(34)
(64)
Net finance income/(expense)
9
(119)
Notes to the Consolidated Financial Statements continued
for the year ended 31 March 2024
22 Income tax expense
2024
2023
£’000
£’000
Current tax
1,023
209
Deferred tax
51
106
1,074
315
Income tax expense for the year differs from the standard rate of taxation as follows:
2024
2023
£’000
£’000
Profit on ordinary activities before taxation
3,109
719
Profit on ordinary activities multiplied by standard UK tax rate
777
137
Difference between tax rates applied to Group’s subsidiaries
243
264
Net expenses not deductible for tax purposes
57
15
Adjustments to trading losses and brought forward values
(3)
(395)
Remeasurement of deferred tax for change in tax rates
(7)
72
Tax on intra-group management charges (Brazil)
256
188
Receipt of research and development credits
(210)
-
Adjustment to current tax in respect of prior years
(21)
78
Adjustments to foreign and withholding tax
120
(390)
Adjustments to deferred tax in respect of prior and current years
(136)
346
1,076
315
The standard tax rate for the years ended 31 March 2024 was 25% (31 March 2023: 19%).
The R&D Tax credits in respect of the years ended 31 March 2021 and 31 March 2022 provided a benefit of £0.2m,
which was received and recognised in the year ended 31 March 2024. The Company is working with its advisors to
submit a claim for a R&D Tax Credit in respect of the year ended 31 March 2023 and 2024. No amounts have been
recognised in respect of claims not yet submitted or approved as their receipt is not considered highly probable.
23 Deferred tax
Deferred tax assets and liabilities are as follows.
2024
2023
£’000
£’000
Deferred tax assets:
- deferred tax assets to be recovered after more than 12 months
37
118
- deferred tax assets to be recovered within 12 months
155
85
192
203
Deferred tax liabilities:
- Deferred tax liability to be Incurred within 12 months
(41)
-
Deferred tax asset (net):
151
203
The gross movement in deferred tax is as follows.
2024
2023
£’000
£’000
Opening balance
203
292
Income statement charge
(51)
(106)
Foreign exchange movements
(1)
17
Closing balance
151
203
System1 Group PLC Annual Report and Accounts 2024
79
System1 Group PLC Annual Report and Accounts 2024
80
23 Deferred tax continued
The movement in deferred income tax assets and liabilities during the year, without taking into consideration the
offsetting of balances within the same tax jurisdiction, is as follows:
Deferred tax assets
Accelerated
Other
Share
Dilapidation
Sabbatical
capital
provisions
options
provisions
provision
allowances
Total
£’000
£’000
£’000
£’000
£’000
£’000
At 1 April 2023
76
23
8
86
10
203
Credited/(charged) to income statement
95
(4)
(6)
(86)
(10)
(11)
At 31 March 2024
171
19
2
-
-
192
Deferred tax liabilities
Accelerated
capital
allowances
£’000
At 1 April 2023
-
Charged to income statement
(41)
At 31 March 2024
(41)
Deferred tax assets are recognised only to the extent that their recoverability is considered probable.
The deferred tax asset in respect of the Company’s share option plans relates to corporate tax deductions avail
able on exercise of employee share options.
24 Earnings per share
2024
2023
Profit attributable to equity holders of the company, in £'000
2,033
404
Weighted average number of Ordinary Shares in issue
12,678,929
12,698,398
Basic earnings/(losses) per share
16.0p
3.2p
Profit attributable to equity holders of the Company, in £’000
2,033
404
Weighted average number of Ordinary Shares in issue
12,678,929
12,698,398
Share options
10,144
12,888
Weighted average number of Ordinary Shares for diluted earnings per share
12,689,073
12,711,286
Diluted earnings per share
16.0p
3.2p
Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the Company
by the weighted average number of Ordinary Shares in issue during the year.
Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding assum
ing conversion of all dilutive share options to Ordinary Shares. Options are included in the determination of diluted
earnings per share if the required performance thresholds would have been met based on the Group’s performance
up to the reporting date, and to the extent that they are dilutive. Accordingly, employee options of 1.3 million (2023:
1.3 million) have not been included in the calculation of diluted EPS because their exercise is contingent on the sat
isfaction of certain criteria that had not been met at 31 March 2024 and 31 March 2023. The total number of options
in issue is disclosed in Note 12.
Notes to the Consolidated Financial Statements continued
for the year ended 31 March 2024
1
System1 Group PLC Annual Report and Accounts 2024
25 Dividendss
The Company did not pay a dividend in the year ended 31 March 2024 and proposes to pay a dividend of 5.0p per
share. The record date is 27 September 2024, and the payment date is 18 October 2024.
No dividends were paid to directors in the years ended 31 March 2024 and 31 March 2023.
26 Net cash generated from operations
2024
2023
£’000
£’000
Profit before taxation
3,108
719
Depreciation and impairment of property, plant, and equipment
702
699
Amortisation and impairment of intangible assets
553
211
Profit on disposal of right-of-use assets
(8)
-
Interest received
(36)
-
Interest paid
35
13
Share-based payment credit
-
(153)
(Increase)/decrease in contract assets
(78)
96
Decrease in finance lease receivables
263
225
Increase in trade and other receivables
(917)
(1,853)
Increase in trade and other payables
2,863
146
Increase/(decrease) in contract liabilities
372
(227)
Decrease in provisions
(445)
(55)
Exchange differences on operating items
18
(31)
6,430
(87)
27 Contingent asset
On 27 September 2021, the Company filed a complaint for trademark infringement, unfair competition and decep
tive trade practices at the United States District Court Southern District of New York against System1 LLC (“LLC”),
since renamed System1 Inc., an omnichannel customer acquisition marketing provider, over their infringing use of
the mark “SYSTEM1”. On 30 June 2023 the Company announced that a settlement had been reached with LLC. The
parties have signed a global agreement which governs the co-existence of their respective use of the “System1”
mark in connection with their operations. As part of this agreement, the Company is receiving a fixed undisclosed
payment payable in instalments through to November 2024. Amounts received under this arrangement are included
as part of other income. The potential quantum of future cashflows under this arrangement cannot be disclosed
under the terms of the legal settlement.
81
System1 Group PLC Annual Report and Accounts 2024
82
28 Related party transactions
The following transactions took place between entities within the Group, all of which are consolidated in these finan
cial statements, and are related parties by virtue of the common control of the Company.
Amounts due
Overhead
from/(to)
charges
Royalties
related parties
£’000
£’000
£’000
2024
System1 Group PLC
8,762
2,755
2,135
System1 Research Limited
(4,030)
(1,267)
424
System1 Research, Inc.
(2,743)
(862)
(1,835)
System1 Research B.V.
(177)
(56)
315
System1 Research Sarl
(407)
(128)
(501)
System1 Research GmbH
(418)
(131)
(917)
System1 Marketing Consulting (Shanghai) Co. Limited
-
-
-
System1 Research Do Brazil Servicos de Marketing Ltda.
-
-
54
System1 Research France Sarl
(530)
(167)
309
System1 Market Research Pte Ltd
(123)
(39)
(511)
System1 Research Pty Ltd.
(335)
(105)
471
System1 Agency Limited
-
-
55
System1 AdRatings Limited
-
-
-
2023
System1 Group PLC
6,801
2,107
2,035
System1 Research Limited
(2,860)
(886)
(583)
System1 Research, Inc.
(2,304)
(714)
(1,065)
System1 Research B.V.
(116)
(36)
(327)
System1 Research Sarl
(332)
(103)
35
System1 Research GmbH
(285)
(88)
(557)
System1 Marketing Consulting (Shanghai) Co. Limited
-
-
178
System1 Research Do Brazil Servicos de Marketing Ltda.
-
-
108
System1 Research France Sarl
(470)
(146)
488
System1 Market Research Pte Ltd
(131)
(41)
(315)
System1 Research Pty Ltd.
(304)
(94)
0
System1 Agency Limited
-
-
5
System1 AdRatings Limited
-
-
(4)
During the year, purchases of £136,374 (2023: £141,181) were made from Merit Data &Technology Limited, a related
party by virtue of the common directorship of Philip Machray. At the year end, an amount of £16,800 was owed (2023:
£nil). Of the purchases made, £37,000 was capitalised within development costs in the year ended 31 March 2024
(2023: £19,094.14). During the year, sales of £5,000 (2023: £nil) were made to Virgin Wines Online Limited, a related
party by virtue of common directorship of Sophie Tomkins. At the year end, an amount of £nil was due (2023: £nil).
29 Audit exemption
System1 Research Limited (company number 03900547), System1 Agency Limited (company number
09829202) and System1 Ad Ratings Limited (company number 11313402) are exempt from the requirements of
the Companies Act 2006 relating to the audit of accounts under section 479A. System1 Group PLC has given a
parental guarantee for all entities above under section 479C of the Companies Act 2006.
Notes to the Consolidated Financial Statements continued
for the year ended 31 March 2024
83
System1 Group PLC Annual Report and Accounts 2024
2024
2023
Note
£’000
£’000
Fixed assets
Intangible assets
2
1,578
1,396
Tangible assets
3
65
808
Investments in subsidiaries
4
581
581
2,224
2,785
Debtors due after one year
5
-
26
Current assets
Debtors due within one year
5
6,047
5,924
Cash and cash equivalents
1,908
1,242
7,955
7,166
Creditors: amounts due within one year
6
5,889
5,182
Net current assets
2,066
1,984
Total assets less current liabilities
4,290
4,795
Creditors: amounts due after one year
6
-
163
Provisions for liabilities
7
40
194
Net assets
4,250
4,438
Capital and reserves
Share capital
9
132
132
Share premium account
1
1,601
1,601
Retained earnings
1
2,517
2,705
Shareholders’ funds
4,250
4,438
As permitted by Section 408 of the Companies Act 2006, the Company’s profit and loss account has not been included in these financial
statements. The Company’s loss after tax was £62,000 (2023: profit of £287,000).
The notes on pages 85 to 93 are an integral part of these company financial statements.
These financial statements were approved by the directors on 3 July 2024 and are signed on their behalf by:
James Gregory
Chris Willford
Director
Director
Company Balance Sheet
as at 31 March 2024
REGISTERED COMPANY NO. 05940040
Share
Share
Retained
capital
account
earnings
Total
£’000
£’000
£’000
£’000
At 1 April 2022
132
1,601
2,706
4,439
Profit for the financial period and total comprehensive
income attributable to the equity holders
-
-
287
287
Transactions with owners:
Employee share options scheme:
- value of employee services
-
-
(153)
(153)
Purchase of treasury shares
(135)
(135)
-
-
(288)
(288)
At 31 March 2023
132
1,601
2,706
4,439
Profit for the financial period
-
-
(62)
(62)
Total comprehensive income
attributable to the equity holders
-
-
(62)
(62)
Transactions with owners:
Employee share options scheme:
- value of employee services
-
-
(126)
(126)
Purchase of treasury shares
-
-
-
-
(126)
(126)
At 31 March 2024
132
1,601
2,517
4,250
The notes on pages 85 to 93 are an integral part of these company financial statements.
84
Company Statement of Changes in Equity
System1 Group PLC Annual Report and Accounts 2024
85
1 Accounting policies
Statement of compliance
The separate financial statements of the Company are presented in accordance with Financial Reporting Standard
101 – ‘The Reduced Disclosure Framework’. They have been prepared under the historical cost convention. The prin
cipal accounting policies adopted in the preparation of these financial statements are set out below. These policies
have been applied consistently throughout the year.
This Company is included in the consolidated financial statements of System1 Group PLC for the year ended 31
March 2024. These accounts are available from the registered office address of the Company, and at system1group.
com/investors.
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure exemptions available
under FRS 101. Therefore, these financial statements do not include:
a) a statement of cash flows and related notes;
b) the requirements of IAS 24 Related Party Disclosures to disclose related party transactions entered between
two or more wholly owned members of the group;
c) disclosure of key management personnel compensation;
d) capital management disclosures;
e) disclosure of leases as required by paragraph 52 of IFRS 16 “Leases”
f)
presentation of a comparative reconciliation of the number of shares outstanding at the beginning and at the
end of the period;
g) the effect of future accounting standards not adopted;
h) disclosures in respect of share-based payments
i)
disclosures in respect of financial instruments and fair value measurement.
As permitted by the Companies Act 2006 section 408, the Company does not present a profit and loss account.
Research and development – internally generated intangible assets
All on-going research expenditure is expensed in the year in which it is incurred. Where no internally generated
intangible asset can be recognised, development expenditure is charged to administrative expenses in the period
in which it is incurred.
Costs relating to the research phase of the product, amounting to £2.4m were expensed in the year to 31 March
2024 (31 March 2023: £2.7m). Development costs include professional fees and directly attributable employee costs
required to bring the software into working condition.
Furthermore, internally generated software and product development costs are recognised as an intangible asset
only if the Company can demonstrate all the following conditions:
a) the technical feasibility of completing the intangible asset so that it will be available for use or sale;
b) its intention to complete the intangible asset and use or sell it;
c) its ability to use or sell the intangible asset;
d) how the intangible asset will generate probable future economic benefits; among other things, the Company
can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself
or, if it is to be used internally, the usefulness of the intangible asset;
e) the availability of adequate technical, financial and other resources to complete the development and to use
or sell the intangible asset;
f)
its ability to measure reliably the expenditure attributable to the intangible asset during its development.
Amortisation
Acquired computer software licences are amortised on a straight-line basis over their estimated useful economic
life of five years.
Capitalised development costs are amortised on a straight-line basis over their estimated useful economic life of
three years.
Amortisation and impairment on all intangible assets are charged to administrative expenses.
Notes to the Company Financial Statements
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
86
1 Accounting policies continued
Investments
Fixed asset investments comprise investments by the Company in the shares of subsidiary undertakings. The carry
ing value of is reviewed for indicators of impairment on an annual basis. Where such indicators are present, a quanti
fied impairment test is required and the value in use calculated based upon a discounted cash flow methodology
using the most recent forecasts prepared by management. No impairment indicators were identified at 31 March
2024 or 31 March 2023.
Tangible assets and right-of-use assets
Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impair
ment losses. Depreciation is provided to write off the cost of all property, plant and equipment to its residual value
on a straight-line basis over its expected useful economic lives, which are as follows:
Furniture, fittings and equipment
5 years
Computer hardware
2 to 3 years
The residual value and useful life of each asset is reviewed and adjusted, if appropriate, at each balance sheet
date. Depreciation is charged to administrative expenses in the income statement.
Right-of-use assets are measured at cost to include the lease liability, direct and restoration cost and are generally
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Payments associated
with short term leases of equipment and vehicles and all leases of low value assets are recognised on a straight-line
basis as an expense in the profit and loss.
Impairment of property, plant and equipment and intangible assets
At each balance sheet date, the Company reviews the carrying amount of its property, plant and equipment and
intangible assets for any indication that those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated to determine the extent of the impairment loss, if any. Intangible
assets not available for use are tested for impairment on at least an annual basis. The recoverable amount is the
higher of the fair value less costs to sell and value in use.
Cash at bank
Cash at bank comprises cash in hand and bank deposits available on demand.
Income taxes
Current income tax liabilities comprise those obligations to fiscal authorities relating to the current or prior report
ing period, which are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws
that have been enacted or substantively enacted at the reporting date applicable to the fiscal periods to which they
relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a
component of tax expense in the income statement, except where it relates to items charged or credited to other
comprehensive income or directly to equity.
Deferred income taxes are calculated using the liability method on temporary differences. This involves the com
parison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective
tax bases. In addition, tax losses available to be carried forward as well as other income tax credits to the Company
are assessed for recognition as deferred tax assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it
is probable that the underlying deductible temporary differences will be able to be offset against future taxable
income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply
to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet
date. Deferred tax is recognised as a component of tax expense in the income statement, except where it relates to
items charged or credited to other comprehensive income or directly to equity.
Employee benefits
All accumulating employee-compensated absences that are unused at the balance sheet date are recognised as a
liability.
The Company operates a defined contribution pension plan. The Company pays contributions to the plan based
upon the contractual terms agreed with each employee. The Company has no further payment obligations once the
contributions have been paid. The contributions are recognised as employee benefit expense when they are due.
Any amounts outstanding at the reporting date are recognised in liabilities within accruals.
Notes to the Company Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
87
1 Accounting policies continued
Share-based payments
Equity-settled, share-based payments are measured at fair value at the date of grant. Equity-settled, share-based
payments that are made available to employees of the Company’s subsidiaries are treated as increases in equity over
the vesting period of the award, with a corresponding increase in the Company’s investments in subsidiaries, based
on an estimate of the number of shares that will eventually vest.
Provisions
Provisions are recognised when: the Company has a legal or constructive obligation because of past events; it is
probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably esti
mated. Where material, the increase in provisions due to passage of time is recognised as interest expense.
The provision for sabbatical leave is measured using the projected unit credit method.
The provision for dilapidations is measured at the present value of expenditures expected to be required to settle
those obligations.
Financial instruments
The Company’s financial assets comprise trade and other receivables held at amortised cost. The Company does not
possess assets held at fair value through profit or loss. The classification is determined by management at initial rec
ognition, being dependent upon the business model and the contractual cash flows of the assets. Financial assets
are derecognised when the rights to receive cash flows from the investments have expired or have been transferred
and the Company has transferred substantially all risks and rewards of ownership. Financial assets arising from con
tracts with customers are separately presented in accordance with IFRS 15 ‘Revenue from Contracts with Customers’
in the Balance Sheet.
Trade and other receivables
Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. The Company’s amortised cost financial assets comprise trade and other receivables and
cash and cash equivalents in the balance sheet.
Trade receivables are initially recorded at fair value, but subsequently at amortised cost using the effective inter
est rate method. In accordance with IFRS 9, the Company assesses on a forward-looking basis, the expected credit
losses associated with its financial assets carried at amortised cost. This assessment considers the age of the debt,
as well as historical experience. The amount of the write-down is determined as the difference between the asset’s
carrying amount and the present value of estimated future cash flows.
Financial liabilities
Financial liabilities are initially recognised at fair value, net of transaction costs, and subsequently carried at amor
tised cost using the effective interest rate method. Financial liabilities and equity instruments are classified accord
ing to the substance of the contractual arrangements entered. An equity instrument is any contract that evidences a
residual interest in the assets of the entity after deducting all its financial liabilities.
Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt
instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in
the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the income state
ment. Finance costs are calculated to produce a constant rate of return on the outstanding liability. Where the con
tractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed
as an equity instrument. Dividends and distributions relating to equity instruments are debited directly to equity.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the
present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit
in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease
payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on
an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option
when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The vari
able lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
System1 Group PLC Annual Report and Accounts 2024
88
1 Accounting policies continued
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate
used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liabil
ity is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying
amount of the right-of-use asset is fully written down.
Share capital
Ordinary shares are classified as equity. Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
Share premium
Share premium represents the excess over nominal value of the fair value of consideration received for equity shares,
net of expenses of the share issue.
Treasury shares
Where the Company purchases the Company’s equity share capital, the consideration paid is deducted from the
total shareholders’ equity and classified as treasury shares until they are cancelled. Where such shares are sub
sequently sold or re-issued, any consideration received is included in total shareholders’ equity. No gain or loss is
recognised on the purchase, sale, issue or cancellation of the Company’s own equity instruments.
Significant accounting estimates and judgements
Capitalisation of development costs - judgement
The point at which development costs meet the criteria for capitalisation is critically dependent on management’s
judgement of the point at which technical feasibility is demonstrable. Furthermore, the useful economic lives of
capitalised development costs are based on management’s knowledge of the life cycle of the Group’s products and
technology. The carrying value of development assets also depends on management’s ability to demonstrate the
future economic benefits they will deliver. This judgement requires assumptions about factors outside the business’s
control such as short and medium term economic conditions, technological developments and market changes.
Details are contained in note 2.
Impairment of development costs – judgement and estimate
The Group tests annually whether intangible assets, have been impaired by reference to expected future generation
of cash from the relevant platforms incorporating the technologies and methodologies developed. In estimating
the cash flows the capitalised development costs may generate the directors make judgements, based on budgets
and forecasts, about the amount of future profits from the relevant products that will be generated and the timing of
when these will be realised. Furthermore, where new technology is acquired through an acquisition, management
consider the impact this could have on the carrying value of existing technology, that is similar in nature, when pre
paring the budgets and forecasts. The Group has carried out an impairment review and determined no impairment is
required in the year ended 31 March 2024 (31 March 2023: £nil). Details are contained in note 2.
Share-based payments – judgement and estimate
In the past the Company has on occasion cash-settled part of long-term incentive plan equity awards. Despite the
repurchase of these equity interests the Company did not have an obligation to do so and does not have an obliga
tion, constructive or otherwise to do so in the future. As a result, the Company continues to account for share-based
payments related to its long-term incentive plans as equity rather than cash-settled.
The 2021 LTIP is subject to non-market conditions of Revenue, Profit After Tax and a market condition of the
Company’s share price exceeding certain targets; the full details of which are given in the Company’s Remuneration
Report. The measure of the share-based payment charge is dependent on the estimates made in respect of the prob
ability of those targets being achieved over the vesting period of the options. The key inputs into those estimates are
the Company’s forecasts, revenue volatility and inflation. Revenue volatility is determined by reference to the share
price volatility used to determine the fair value of the options (with an assumption that the two will have a high level
of correlation). Inflation is determined by reference to the Bank of England data for the UK in March and April 2024.
Non-market vesting conditions are assessed by reference to the Group’s latest forecasts. Following management’s
assessment that the probability of the non-market vesting conditions being met is low, the cumulative share option
charge of £126,000 has been reversed in FY24.
Notes to the Company Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
78
1 Accounting policies continued
Employee benefits – estimate
The Company has historically operated a sabbatical leave scheme, which provided 20 days paid leave for each suc
cessive period of six years’ service. There was no proportional entitlement for shorter periods of service. During the
year ended 31 March 2023, the Company modified the terms of the scheme such that rather than being open to all
employees, the scheme was only available to those individuals who had accrued three or more years of unbroken
service as at 30 September 2022. During the year ended 31 March 2024, the Company ceased to operate the sab
batical provision in its entirety, with no previously eligible individuals entitled to any further paid leave under the
scheme or any alternate compensation. Accordingly, the provision has been released in full. The significant inputs
into the model were previously rate of salary growth and average staff turnover as explained in Note 7.
The average number of staff employed by the Company during the year ended 31 March 2024 was 65 (2023: 64)
and total employment costs were £7,785,000 (2023: £6,072,000).
Leases – estimate and judgement
Management exercises judgement in determining the likelihood of exercising break or extension options in deter
mining the lease term, and reviews this on a lease-by-lease basis.
The discount rate used to calculate the lease liability is the rate implicit in the lease, if it can be readily determined,
or the lessee’s incremental borrowing rate if not. Incremental borrowing rates are determined based on the term,
country, currency and start date of the lease, to derive the rate of interest that the lessee would have to pay to borrow
over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-
of-use asset in a similar economic environment.
2 Intangible assets
Development
costs
Software
Total
£’000
£’000
£’000
Cost at 1 April 2022
-
525
525
Additions
1,225
-
1,225
Cost at 31 March 2023
1,225
525
1,750
Amortisation at 1 April 2022
-
143
143
Amortisation for the year
101
110
211
Amortisation at 31 March 2023
101
253
354
Carrying value at 31 March 2023
1,124
272
1,396
Cost at 1 April 2023
1,225
525
1,750
Additions
736
-
736
Cost at 31 March 2024
1,961
525
2,486
Amortisation at 1 April 2023
101
253
354
Amortisation for the year
423
131
554
Amortisation at 31 March 2024
524
384
908
Carrying value at 31 March 2024
1,437
141
1,578
Amortisation charges are included within administrative expenses.
89
System1 Group PLC Annual Report and Accounts 2024
90
2 Intangible assets continued
The only software cost as at 31 March 2024 is the Group’s finance and operations system that was brought into
use October 2020.
Development costs relate to costs capitalised for the development of the “Test Your” platform (carrying value
£464k; 2023: £865k), which completed during the year ended 31 March 2023, and the Supply Chain Automation
platform (carrying value £930k; 2023: £259k), which enables System1 to interface (via API) with multiple suppliers
of panel respondents, was substantially completed at the end of the year ended 31 March 2024. Development costs
in respect of completed projects are tested for impairment where impairment indicators exist. No indicators exist at
31 March 2024 (31 March 2023: none). Development costs in respect of ongoing projects are tested for impairment
at each reporting date. The carrying value of the assets in each case are assigned to their respective cash generat
ing units for the purposes of assessing future cashflows. The principal assumptions used in the forecasts were the
timing and amount of future revenues and cost savings, which were derived from the latest forecasts approved by
the Board. Following the assessment, the Board have determined that no impairment of assets is required as at 31
March 2024 (31 March 2023: £nil). The headroom in the impairment review exceeds the carrying value of the asset.
3 Tangible assets
Right-of-use
Furniture and
Computer
assets
fixtures
hardware
Total
£’000
£’000
£’000
£’000
Cost at 1 April 2022
2,682
10
165
2,857
Additions
-
1
23
24
Disposals
(1,437)
-
-
(1,437)
Cost at 31 March 2023
1,245
11
188
1,444
Depreciation at 1 April 2022
1,283
7
103
1,393
Depreciation charge for the year
621
2
57
680
Disposals
(1,437)
-
-
(1,437)
Depreciation at 31 March 2023
467
9
160
636
Carrying amount 31 March 2023
778
2
28
808
Cost at 1 April 2023
1,245
11
188
1,444
Additions
-
-
85
85
Disposals
(1,245)
(11)
-
(1,256)
Cost at 31 March 2024
-
-
273
273
Depreciation at 1 April 2023
467
9
160
636
Depreciation charge for the year
622
2
48
672
Disposals
(1,089)
(11)
-
(1,100)
Depreciation at 31 March 2024
-
-
208
208
Carrying amount 31 March 2024
-
-
65
65
Notes to the Company Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
4 Investments
£’000
Cost and net book amount at 1 April 2023 and 31 March 2024
581
Subsidiary undertakings
Details of subsidiary undertakings, registered office and country of incorporation of each, at 31 March 2024 are as
follows:
Country of
Subsidiary undertaking
Registered office
incorporation
System1 Research Limited
4 More London Riverside, London, England, SE1 2AU
UK
System1 Research B.V.
Conradstraat 38 D2. 138, 3013AP Rotterdam
Netherlands
System1 Research, Inc.
251 Little Falls Drive, Wilmington, DE 19808,
New Castle County, Delaware
USA
System1 Research Sarl
Avenue Gratta Paille 2, 1018 Lausanne, Switzerland
Switzerland
System1 Research GmbH
Kleine Seilerstrasse 1 D-20359 Hamburg
Germany
System1 Research Do Brazil Servicos de Marketing Ltda.
Avenida das Nacoes Unidas 14261 – Conj. 25-126B –
Cond. WT Morumbi, CEP 04794-000, Vila Gertrudes, São Paulo
Brazil
System1 Research France Sarl
17 Rue de Turbigo, 75002 Paris
France
System1 Market Research Pte Ltd
30 Cecil Street, #19-08 Prudential Tower, 049712
Singapore
System1 Research Pty Ltd.
Suite 1, Level 11, 60 Castlereagh Street, Sydney, NSW 2000
Australia
System1 Agency Limited
4 More London Riverside, London, England, SE1 2AU
UK
System1 AdRatings Limited
4 More London Riverside, London, England, SE1 2AU
UK
System1 Research Limited, System1 Agency Limited, and System1 AdRatings Limited are wholly owned direct
subsidiaries of System1 Group PLC. The remaining subsidiaries are each wholly owned direct subsidiaries of System1
Research Limited. The activities of all companies are the provision of market research data and insight services, apart
from System1 Agency Limited and System1 AdRatings Limited, which are dormant.
5 Debtors
2024
2023
£’000
£’000
Due within one year
Trade debtors
1
12
Trade debtors from group companies
4,873
5,131
Amounts due from group companies
81
126
Other debtors
84
92
VAT recoverable
211
203
Corporation tax recoverable
15
2
Deferred tax asset
-
-
Prepayments
782
358
5,924
8,147
Due after one year
Deferred tax asset
-
26
The Company assesses on a forward-looking basis, the expected credit losses associated with its debt instru
ments carried at amortised cost. The Company assesses expected credit losses based on the ageing of the receiv
able, the Group's historical experience and informed credit assessment. Further credit losses are recognised where
the Company has information that indicates it is unlikely to recover balances in full.
The Company is part of a VAT group with its wholly owned subsidiary, System1 Research Limited. As at 31 March
2024, System1 Research Limited had a VAT liability of £473,000, therefore the net exposure of the two entities is
£262,000 (2023: creditor of £211,000).
91
System1 Group PLC Annual Report and Accounts 2024
92
6 Creditors
2024
2024
£’000
£’000
Due within one year
Trade creditors
693
741
Social security and other taxes
181
-
Amounts due to group companies
2,818
3,220
Lease liabilities
-
630
Accruals
2,197
591
5,889
5,182
Due after one year
Lease liabilities
-
163
-
163
7 Provisions for liabilities
Leasehold
Deferred tax
Sabbatical
dilapidations
Total
£’000
£’000
£’000
£’000
At 1 April 2022
-
254
10
264
Provided in the year
-
10
10
Reversal of unused amounts
-
(59)
-
(59)
At 31 March 2023
-
184
10
194
Provided in the year
38
-
-
38
Utilised in the year
-
(12)
-
(12)
Reversal of unused amounts
-
(172)
(8)
(180)
At 31 March 2024
38
-
2
40
Due within one year
-
-
2
2
Due after one year
38
-
-
40
The Company has historically operated a sabbatical leave scheme, which provided 20 days paid leave for each
successive period of six years’ service. There was no proportional entitlement for shorter periods of service. During
the year ended 31 March 2023, the Company modified the terms of the scheme such that rather than being open to
all employees, the scheme was only available to those individuals who had accrued three or more years of unbroken
service as at 30 September 2022. During the year ended 31 March 2024, the Company ceased to operate the sab
batical provision in its entirety, with no previously eligible individuals entitled to any further paid leave under the
scheme or any alternate compensation. Accordingly, the provision has been released in full.
The assumptions previously used in the valuation of the sabbatical provision is as follows:
2024
2023
Measurement method
Project unit credit method
Discount rate, based on 6-year corporate bond yields
NA
5.0%
Annual salary growth rate
NA
7%
Staff turnover
NA
14%
£’000
Changes to the assumptions made in 2023 would have increased the provision by:
0.25% decrease to discount rate
-
10% increase to salary increase assumption
8
5% decrease to staff turnover assumption
12
10% of salary paid as bonus to all members
39
Notes to the Company Financial Statements continued
for the year ended 31 March 2024
System1 Group PLC Annual Report and Accounts 2024
8 Deferred tax
Deferred tax assets and liabilities are as follows.
2024
2023
£’000
£’000
Deferred tax assets:
- deferred tax assets to be recovered after more than 12 months
-
70
- deferred tax assets to be recovered within 12 months
33
26
33
96
Deferred tax liabilities:
- deferred tax liability to be recovered within 12 months
(71)
(70)
Deferred tax (liability)/asset (net):
(38)
26
The gross movement in deferred tax is as follows.
2024
2023
£’000
£’000
Opening balance
26
19
Income statement (charge)/credit
(64)
7
Closing balance
(38)
26
The movement in deferred income tax assets and liabilities during the year, without taking into consideration the
offsetting of balances within the same tax jurisdiction, is as follows:
Deferred tax assets
Other
Share
Sabbatical
provisions
options
provision
Total
£’000
£’000
£’000
£’000
At 1 April 2023
28
22
46
96
Credited/(charged) to income statement
(6)
(11)
(46)
(63)
At 31 March 2024
22
11
-
33
Deferred tax liabilities
Accelerated
capital
allowances
£’000
At 1 April 2023
(71)
Credited to income statement
-
At 31 March 2024
(71)
9 Share capital
2024
2023
No.
£’000
No.
£’000
Allotted, called up, and fully paid ordinary shares At 1 April and at 31 March
13,226,773
132
13,226,773
132
Included within issued share capital are 547,844 ordinary shares held in treasury.
10 Related party transactions
During the year, purchases of £136,374 (2023: £141,181) were made from Merit Data &Technology Limited, a related
party by virtue of the common directorship of Philip Machray. At the year end, an amount of £16,800 was owed
(2023: £nil). Of the purchases made, £37,000 was capitalised within development costs in the year ended 31 March
2024 (2023: £19,094.14). During the year, sales of £5,000 (2023: £nil) were made to Virgin Wines Online Limited, a
related party by virtue of common directorship of Sophie Tomkins. At the year end, an amount of £nil was due (2023:
£nil).
93
System1 Group PLC Annual Report and Accounts 2024
94
Company Information
Independent Auditor
Haysmacintyre LLP
Statutory Auditor
Chartered Accountants
10 Queen Street Place
London
EC4R 1AG
Registrars
Link Asset Services
34 Beckenham Road
Beckenham
Kent
BR3 4TU
United Kingdom
Nominated Adviser & Broker
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
United Kingdom
Company Secretary
Renata Ziolko-Nishikant
Registered Office
4 More London Riverside
London
England
SE1 2AU
United Kingdom
Registered Number
05940040
System1 Group PLC
4 More London Riverside
London
England
SE1 2AU
United Kingdom
info@system1group.com
www.system1group.com