SpaceandPeople: On the road to recovery says Zeus Capital

SpaceandPeople plc

SpaceandPeople plc (LON:SAL) secures, sells, and manages flexible space for promotions and marketing in high footfall venues for its customers, including in shopping centres and travel hubs. As expected, trading through H121a was challenging due to continuing lockdowns and restrictions, but revenue improved slightly, and losses reduced with cost savings. SAL is trading at about operating cash break-even. Stability does not appear to be threatened, particularly with further CIBLS finance secured, and good backing from the bank.

On the outlook, trading is starting to recover. Venues started to reopen during April/May in the UK, and June in Germany. Management report recovery in promotional revenue in the UK driven by kiosk bookings. In Germany, the Group has secured a multi-year contract extension with leading shopping centre operator ECE which should lift trend growth from next year. We think it is too soon to publish forecasts given the uneven pace of recovery. Consumer confidence remains strong but there are growing concerns on the impact of inflation on disposable incomes. In broad terms, we expect SAL to report at about break-even for 2021e before a return to profitability in 2022e.

Challenging start to 2021e but liquidity is sound – SpaceandPeople has reported H1 results to 30 June 2021. Net revenue improved slightly, up 2.5% to £1.10m. Recovery was held back with many venues still closed during the period. That said, losses reduced sharply, with LBT at £0.27m (H120a: loss £2.13m). This was mainly due to significant reductions in costs (c.£1m) as a response to the COVID crisis. Net cash outflow from operating activities also reduced to £0.13m (H120a: outflow £0.34m). Overall, liquidity appears comfortable, with facilities at 30 June 2021 of £1.51m (June ‘20: £2.23m) and £1.6m at 23 Sept. ‘21 (Sept. ‘20: £1.6m).

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Direction of travel is positive – Trading is starting to recover slowly, led by the UK but with Germany catching-up. Retail and promotions have recovered more quickly than brand experiences. Shopping centres have recovered more quickly than train stations, which have been hampered by a slower return of footfall, particularly in London. As we move through 2022e, recovery across-the-board should accelerate. We could also see a step change in growth and margins for SpaceandPeople with a strengthened portfolio of shopping centres in the UK and Germany. That said, given the uncertain path of recovery for the next few months, we have not published estimates at this time. Consumer confidence has recovered but more recently there are concerns about the impact of inflation on disposable incomes. Media spending has recovered but is more tilted to digital rather than out-of-home advertising. Broadly, we expect SAL to report about break-even in 2021e. Looking forward, for 2022e, we think a reasonable run-rate of £5m-£7m of revenue is achievable with a c.60% gross margin, and a profit at PBT. We believe the Group is on the road to recovery.

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