My Portfolio: Year In Review 2022

01 January 2023
By Maynard Paton

Happy New Year!

I trust you enjoyed the festive break and are now ready to battle the market for another twelve months!

This 4,680-word post provides a ‘year in review’ of my current holdings. I recap how each business performed during 2022 as well as provide a few remarks about valuation. 

These reviews are very useful to write, not least because they help ensure I am still invested for the right reasons. Any upsets I will suffer during 2023 will most likely be caused by the shares I already own rather than any new shares I will buy.

I undertook the same annual review at the start of 2015, 2016, 2017, 2018, 2019, 2020, 2021 and 2022.

My portfolio lost 23.3% during 2022. This other post explains that performance in more detail and clarifies how my portfolio begins 2023.

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[Podcast] SYSTEM1 With Mark Atkinson And Maynard Paton

23 October 2022
By Maynard Paton

I have recorded another episode of The Private Investor’s Podcast with my good friend Mark Atkinson. We talked about System1 and the investment potential of testing adverts:

We cover:

  • My fourth System1 AGM and my share purchases.
  • What the company does: testing television adverts and marketing ideas.
  • ‘System 1’ and ‘system 2’ thinking within broadband adverts.
  • Validation of the company’s service through the partnership with ITV.
  • The transition from ad-hoc consultancy work to automated data services.
  • The competitive advantage gained through years of accumulating advert data.
  • The chairman’s handling of the AGM.
  • Microphones, voting cards and special lunches. 
  • AGM formalities and Section 319A of the Companies Act.
  • Protest votes against two non-execs and the strategic review. 
  • The company’s podcast becoming a sales tool.
  • Mark’s verdict and closing remarks.

Extra links:

Happy listening!

Maynard Paton

PS: The AGM took place on 28th September 2022 and the podcast recording took place on 21st October 2022.

Disclosure: Maynard owns shares in System1.

SYSTEM1: £100m Revenue Ambition Disappears Following Disappointing H2 Loss As Tender Offer Cancelled And Agitated Shareholder Initiates Strategic Review

24 September 2022
By Maynard Paton

Results summary for System1 (SYS1):

  • A disappointing FY 2022 performance, with a Q4 sales warning alongside greater costs leading to a small H2 loss.
  • SYS1’s ‘Reasons to Believe’ have been diluted, and hint at reduced long-term expectations following the disappearance of a £100m revenue ambition.
  • The transition to new data and consultancy services continues, with such income representing 51% of total revenue for FY 2022 and possibly 70% for Q1 2023.
  • A fresh non-exec reveals the agitated shareholder who has initiated a strategic review, which in turn led to the sensible cancellation of a tender offer.
  • Net cash represents 31% of the market cap, with long-term multi-bagger potential presently obscured by weak legacy services and costs running ahead of new-product revenue. I continue to hold. 

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SYSTEM1: Data Services Reaching 43% Of Revenue Supports Long-Term ‘Platform’ Ambitions Although Q4 Consultancy Warning Emphasises Risk Of Transition Mishaps

02 March 2022
By Maynard Paton

Results summary for System1 (SYS1):

  • An acceptable H1 performance, albeit with profit lower than I had anticipated due to greater costs associated with the transition to Data services.
  • Data services continue to advance, representing 36% of total revenue for H1 and reaching 43% for the subsequent Q3.
  • UK revenue jumping 33% in part through an influx of new Data clients suggests the partnership with ITV is working.
  • A Q4 sales warning relating to old-style Consultancy activities emphasised management’s upbeat ambitions are susceptible to mishaps.
  • Net cash now represents 25% of the market cap, with long-term multi-bagger upside still obtainable if LTIP revenue targets are met and healthy ‘platform’ margins are delivered. I continue to hold. 

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My Portfolio: Year In Review 2021

01 January 2022
By Maynard Paton

Happy New Year!

I trust you enjoyed the festive break and are now ready to battle the market for another twelve months!

This 4,609-word post provides a ‘year in review’ of my current holdings. I recap how each business performed during 2021 as well as provide a few remarks about valuation. 

These reviews are very useful to write, not least because they help ensure I am still invested for the right reasons. Any upsets I will suffer during 2022 will most likely be caused by the shares I already own rather than any new shares I will buy.

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SYSTEM1: Better-Than-Expected FY 2021 Results Reveal Accelerating Data Transition And Bold £1 BILLION Market Cap Opportunity

07 September 2021
By Maynard Paton

Results summary for System1 (SYS1):

  • A better-than-expected H2 accompanied some bold management commentary that cited an eventual £1 billion market cap. 
  • The acceleration towards ‘scalable’ data products continues, with ‘disruptive’ pricing and partnerships with ITV and LinkedIn spearheading the transition.  
  • Downgraded option targets and upgraded director pay looked awkward given the optimistic narrative and receipt of government pandemic support.
  • Greater net cash, a mooted share buyback and a 21% adjusted H2 margin suggest the accounts have recuperated from their pandemic nadir.
  • Despite extra growth investment limiting near-term earnings progress, long-term multi-bagger upside may still be obtainable. I continue to hold. 

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My Portfolio: Year In Review 2020

01 January 2021
By Maynard Paton

Happy New Year!

I trust you enjoyed the festive break and are now ready to battle the market for another twelve months!

This 4,631-word post provides a ‘year in review’ of my current portfolio holdings. I recap how each business performed during 2020 as well as provide a few remarks about valuation. 

These reviews are very useful to write — not least because they help ensure I am still invested for the right reasons! Any upsets I will suffer during 2021 will most likely be caused by the shares I already own rather than any new shares I will buy.

Read more

SYSTEM1: Remarkable Q2 May Lead To 8x P/E And Potential Recovery Helped By ITV Progress, New Clients And Net Cash

11 December 2020
By Maynard Paton

Results summary for System1 (SYS1):

  • A pandemic-disrupted first half, albeit with headline numbers that disguised a remarkable return to profitability during Q2.
  • Revenue improvements within the Communications and UK segments suggest the tie-up with ITV is working.
  • A bold pricing structure, greater ambition clarity and even improved film-making may explain why adidas has become a client.
  • The accounts are in reasonable shape, with significant net cash, positive cash generation and perhaps a decent profit margin following various cost savings.
  • Extrapolating the Q2 profit leads to a lowly 8x multiple and intriguing recovery/upside possibilities. I have bought more shares.

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System1: 2021 Recovery Hopes Seem Dependent Upon ITV And (Bizarrely) 18th Century German Literature Following Profit Crash, Scrapped Dividend And AdRatings Write-Off

17 July 2020
By Maynard Paton

Results summary for System1 (SYS1):

  • Somewhat academic annual figures that showed pre-AdRatings profit down 27% due to weak trading prior to Covid-19.
  • The pandemic has since caused demand for SYS1’s services to drop 38% and created pre-tax losses.
  • AdRatings continues to generate minimal revenue at significant cost, although the tie-up with ITV suggests the fledgling service has some inherent value.
  • SYS1 bizarrely remains very poor at marketing its own services. A flagship company film commences with references to 18th century German literature. 
  • A £3.9m cash buffer ought to keep SYS1 afloat as it moves towards more reliable revenue sources. Valuation in the meantime remains anyone’s guess. I continue to hold.

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My Portfolio: Year In Review 2019

10 January 2020
By Maynard Paton

Happy January!

I trust you enjoyed the festive break and are now ready to battle the market for another twelve months!

This 5,562-word post provides a ‘year in review’ of my current portfolio holdings. I recap how each of the underlying businesses performed during 2019, as well as provide a few remarks about valuation.

As I mentioned this time last year, I find writing such reviews extremely useful — not least because I double-check my investment logic to ensure I am still invested for the right reasons! The upsets I will suffer during 2020 will most likely be caused by the shares I already own rather than by new shares I purchase.

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System1: As H1 Figures Show Just 4% Top-Line Growth And AdRatings Burning £2m A Year, Could ITV’s Euro 2020 Competition Validate A Potential Recovery?

20 December 2019
By Maynard Paton

Results summary for System1 (SYS1):

  • Another unremarkable performance, with underlying gross profit up 4% and profit (without AdRatings) rebounding 24% due mostly to improved cost control.  
  • The start-up AdRatings service continues to lose £2m a year and is increasingly dictating the company’s progress, potential and valuation.
  • An ITV competition to determine the most “emotionally engaging” advert during Euro 2020 could create extra recognition for System1-type marketing and SYS1’s services. 
  • The accounts remain cash rich and the business (without AdRatings) exhibited a healthy 21% margin.
  • The P/E could be anywhere between 8 and 26 depending on how AdRatings, share-based payments and the cash position are viewed. I continue to hold.

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System1: 2019 Results Prompt Awkward Questions After Woeful £3k AdRatings Revenue

25 June 2019
By Maynard Paton

Results verdict on System1 (SYS1):

  • An unspectacular performance with gross profit unchanged and profit rebounding due only to cost cuts.  
  • The new AdRatings service suffered a woeful start after generating revenue of just £3k.
  • The lack of all-round progress prompts awkward questions as to whether the group’s advert-analysis services are actually of much interest to the marketing industry.
  • The accounts remain cash rich and would exhibit respectable ratios were it not for the chunky AdRatings start-up costs.
  • The P/E could be somewhere between 10 and 15 assuming AdRatings one day breaks even (or is scrapped). I continue to hold.

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My Portfolio: Year In Review 2018

01 January 2019
By Maynard Paton

Happy New Year!

I trust you enjoyed the festive break and are now raring to do battle with the market for another twelve months!

This first Blog post of 2019 provides a ‘year in review’ of my current portfolio holdings. I recap how each of the underlying businesses performed during 2018, as well as provide a few remarks about valuation.

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System1: H1 Results Could Mean The P/E Is Just 9… Assuming The Ad Ratings Service Eventually Becomes A Money-Spinner (I’m Not Sure)

06 November 2018
By Maynard Paton

Update on System1 (SYS1).

Event: Interim results for the six months to 30 September 2018 published 02 November 2018.

Summary: A couple of earlier updates had already signalled this lacklustre first-half performance. Indeed, several references to competitive pricing and re-designed products implied the advertising research specialist may no longer be the ‘pioneering’ force it once was. Furthermore, the new Ad Ratings service could be hard pushed to become a real money-spinner and return the group to growth. That said, margins remain good, there is cash in the bank and the P/E might be 9… if you believe some significant development expenditure will eventually pay off. I continue to hold.

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System1: Boss Blames Buffett-Backed Bid For Client Cutbacks And 72% Profit Crash

08 June 2018
By Maynard Paton

Update on System1 (SYS1).

Event: Annual results for the twelve months to 31 March 2018 published 01 June 2018

Summary: A series of poor updates had already heralded what SYS1’s founder described as a “miserable” performance. However, shareholders did receive a candid explanation of what went wrong — with a Warren Buffett-backed bid to buy Unilever taking some of the blame. However, a greater concern is whether SYS1’s pioneering market-research techniques remain that pioneering — the competition is apparently catching up. A lot now rests on whether SYS1’s founder has the ability to lead another recovery. I continue to hold.

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