Trading since the Group's rebrand from Brainjuicer to System1 The marketing services Group
Companies: System1 Group
System1 (LON: SYS1), who was known as Brainjuicer until the Company's rebrand in April this year, has seen a quarter of its share price wiped off this morning with the release of its Interims.
The change to System1 came after 16 years as the award-winning marketing company Brainjuicer, but it seems the shift hasn't proved as fruitful as management would have liked.
Today's Interims report a 9% decline in Revenue to £11.4m and a 70% decline in Net Profits to £0.5m. The slowdown comes after a 27% increase in Revenues in the last fiscal year.
"These results were as unexpected as they were disappointing" the statement said.
Management cited three main reasons for the slowdown, including less business from "several significant" FMCG clients, time spent on the rebrand and not on clients, as well an industry-wide shift towards more automated research data.
The Group's largest profit stream comes from its Innovation Testing operations, which saw a decline of 27% in H1 18, while most geographical markets also saw a slowdown in Revenue.
At a profit level, the impact of these declines Management said:
"Has been exacerbated by an increase in costs following investment in our US business and new Advertising Agency. The Group invested in its US business on the back of its consistently strong performance, and this in part drove underlying overheads up by 23%."
Almost 25% of the share price has been wiped off this morning off the back of the results, trading at 389p.
The short-term future doesn't seem to look much brighter for the Company, with Group SYS1 CEO John Kearon commenting:
"Trading in Q3 to date has not yet resulted in a pick-up in our order book. Were the gross profit decline seen in H1 to be repeated in H2, then notwithstanding the lower rate of underlying overhead increase, our profit before tax (reported) for the full year would decline by 50% to 60% (2016/17: £6.3m). Normalised profit before tax (i.e. profit before tax excluding share based payments) would decline by a similar percentage."
The stock began rallying early in 2016 and peaked at 1020p per share in May this year shortly after the rebrand announcement. It trades at a current PE ratio of 14x and has a Market Cap of £64m. In the five years to 2017 EPS growth averaged over 20%.