SpaceandPeople — Update 31 January 2016

SpaceandPeople — Update 31 January 2016

SpaceandPeople

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

SpaceandPeople

Bowling along

Year-end trading update

Media

1 February 2016

Price

56.0p

Market cap

£11m

Net cash (£m) at 31 December 2015

0.75

Shares in issue

19.5m

Free float

81.9%

Code

SAL

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(10.4)

(20.6)

(12.5)

Rel (local)

(5.2)

(14.2)

(1.7)

52-week high/low

87.50p

52.50p

Business description

The SpaceandPeople Group markets, sells and administers space in high footfall venues, including shopping centres, city centres, retail parks, travel hubs and garden centres. With offices in the UK, Germany, India and Russia, it matches brands and promoters to appropriate venues.

Next event

Preliminary results

29 March 2016

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Bridie Barrett

+44 (0)20 3077 5700

SpaceandPeople is a research client of Edison Investment Research Limited

SpaceandPeople (SAL) has added another major client, British Land, starting with Drake Circus in Plymouth, then across its broader multi-let retail portfolio in due course. This follows on from last year’s landmark contract win of Network Rail. The trading update confirms that underlying FY15 results were in line with expectations (although an accounting adjustment pushes some net revenue recognition into FY16). With a cash-positive balance sheet and 10% uplift in the dividend, SAL’s shares have yet fully to reflect the positive momentum in the newsflow.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/13

14.6

2.5

10.1

4.1

5.5

7.3

12/14

15.4

1.2

3.9

2.0

14.4

3.6

12/15e

15.5

1.3

4.3

2.2

13.0

3.9

12/16e

17.7

1.9

6.7

2.4

8.4

4.3

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Major new contracts drive growth

FY15 was a major year of transition for SAL, with the launch of the Mobile Promotion Kiosk (MPK) concept (and associated investment programme) and, importantly, the validation of the value of its promotional offer from the Network Rail contract win. Adding the British Land shopping centres is further reinforcement of SAL’s credibility as an operator and should help to increase the visibility of promotional and experiential marketing within the mix of marketing spend. The early-stage pilot with Immochan in France (commenced 1 January 2016) further increases the geographic reach and is being run on a low-risk basis.

Underlying performance in line

With the timing and scale of the British Land contract so recently won, we are not yet in a position to model the financial implications and our FY16 forecasts are not adjusted. We will do so after the publication of the final results on 19 March. Trading in H215 was in line with management expectations, although the reported figure will appear lower than market forecasts. This relates to a decision to recognise £150k of net revenues from the MPKs on the same basis as that of Retail Merchandising Units (RMUs), a decision that helps future revenue visibility. Our presentation of pre-tax profits is before the attribution to minority shareholders, so the underlying £1m indicated by the company is in line with our previous £1.4m forecast. Earnings per share of 4.3p will have benefited from a reduced tax rate stemming from accelerated capital allowances on investment in MPKs.

Valuation: Discount overdone

The share price has drifted following the positive news of the Network Rail win last September. This resumption of positive newsflow underpins the stock’s growth credentials. We expect the valuation discount to other smaller marketing services stocks to narrow from the current 31% on December 2016 P/E, 38% on EV/EBITDA.

Financial summary

Exhibit 1: Financial summary

£'ms

2013

2014

2015e

2016e

31-December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

14.567

15.446

15.473

17.700

Cost of Sales

(4.023)

(5.839)

(5.900)

(6.500)

Gross Profit

10.544

9.607

9.573

11.200

EBITDA

 

 

2.657

1.616

1.723

2.418

Operating Profit (before amort. and except.)

2.293

1.155

1.270

1.921

Intangible Amortisation

(0.014)

(0.019)

(0.025)

(0.025)

Exceptionals

0.000

(0.391)

0.000

0.000

Other

0.000

0.000

0.000

0.000

Operating Profit

2.279

0.745

1.245

1.896

Net Interest

0.160

0.018

(0.020)

0.007

Profit Before Tax (norm)

 

 

2.453

1.173

1.250

1.928

Profit Before Tax (IFRS)

 

 

2.439

0.763

1.226

1.903

Tax

(0.648)

(0.166)

(0.180)

(0.386)

Profit After Tax (norm)

1.805

1.007

1.070

1.542

Profit After Tax (IFRS)

1.791

0.597

1.046

1.518

Minority interest

0.180

(0.140)

(0.250)

(0.250)

Average Number of Shares Outstanding (m)

19.5

19.5

19.5

19.5

EPS - normalised (p)

 

 

10.1

3.9

4.3

6.7

EPS - (IFRS) (p)

 

 

10.1

2.3

4.1

6.5

Dividend per share (p)

4.1

2.0

2.2

2.4

Gross Margin (%)

72.4

62.2

61.9

63.3

EBITDA Margin (%)

18.2

10.5

11.1

13.7

Operating Margin (before GW and except.) (%)

15.7

7.5

8.2

10.9

BALANCE SHEET

Fixed Assets

 

 

9.822

9.617

9.840

9.218

Intangible Assets

8.232

8.243

8.218

8.194

Tangible Assets

1.590

1.374

1.621

1.024

Investments

0.000

0.000

0.000

0.000

Current Assets

 

 

7.225

6.336

5.308

7.418

Stocks

0.000

0.000

0.000

0.000

Debtors

4.329

3.864

3.868

4.425

Cash

2.088

2.115

1.150

2.117

Other

0.808

0.357

0.290

0.876

Current Liabilities

 

 

(7.027)

(5.915)

(5.313)

(5.681)

Creditors

(6.822)

(5.665)

(5.063)

(5.431)

Short term borrowings

(0.205)

(0.250)

(0.250)

(0.250)

Long Term Liabilities

 

 

(0.010)

(0.260)

(0.660)

(0.210)

Long term borrowings

0.000

(0.250)

(0.150)

(0.150)

Other long term liabilities

(0.010)

(0.010)

(0.510)

(0.060)

Net Assets

 

 

10.010

9.778

9.176

10.745

CASH FLOW

Operating Cash Flow

 

 

2.499

1.723

0.756

2.230

Net Interest

0.160

(0.018)

(0.019)

0.007

Tax

(0.375)

(0.898)

(0.162)

(0.347)

Capex

(0.593)

(0.275)

(0.650)

(0.350)

Acquisitions/disposals

0.000

0.000

0.000

0.000

Equity Financing/Other

0.039

0.000

(0.400)

0.000

Dividends

(0.681)

(0.800)

(0.390)

(0.569)

Net Cash Flow

1.049

(0.268)

(0.865)

0.971

Opening net debt/(cash)

 

 

(0.834)

(1.883)

(1.615)

(0.750)

HP finance leases initiated

0.000

0.000

0.000

0.000

Other

0.000

0.000

0.000

0.000

Closing net debt/(cash)

 

 

(1.883)

(1.615)

(0.750)

(1.721)

Source: Company accounts, Edison Investment Research

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Schumannstrasse 34b

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Germany

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280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

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Level 25, Aurora Place

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