System1 Group (London: SYS1) ended the quarter up marginally, but the modest change masked substantial volatility during the period. After closing Q1 at £8.10 per share, the shares advanced to a high of £10.50 before closing at £8.20.

In June, the company reported on the end of its new March 31-ending fiscal year. The report was positive in our opinion, though in a somewhat vague statement, the company noted that growth in the new fiscal year was “a little slower than we expected.” It raised its H2 dividend 83% to £0.064, and declared a large special dividend of £0.261 per share. In part, the note of caution led to some of the share price volatility to the downside. However, given what we believe to be rather high internal expectations and modest market expectations, the company remains on track and well within the performance expectations that justify our investment (even at the recent highs). Interestingly, the company noted “we remain confident of making further progress over the year as a whole” and the shares were upgraded by the company’s house broker. Inclusive of the upcoming dividends, we will have received £0.491 per share in dividends during our first 18 months of ownership, against our average purchase price of £2.78.

Additionally, the company has repurchased shares equivalent to approximately 10% of the market capitalization at the time of our purchase. In June, Matt attended a book launch that the company hosted in New York City as part of the company’s rebranding. Additional valuable insight was gained about customer needs and beliefs, employee opinions, the new launch of the company’s marketing agency business, new product development, and the competition.

This post has been excerpted from a letter to partners of Boyles Asset Management.