Deeper foundations post restructuring

​SpaceandPeople provides property owners with ways to capitalise upon the full commercial potential of retail assets. It markets, sells and administers free space in venues including shopping malls, garden and city centres, retail parks and travel hubs.

We have trimmed our revenue forecasts to reflect the content of the pre-close update, but still anticipate a £0.7m adjusted profit in FY ‘17. Q4 ‘16 was slower than expected, with some installations delayed into the current year and more non-recurring expenses related to restructuring (which has cut ongoing costs). The result is a £0.7m shortfall in FY ‘16 revenues vs forecasts, pre-tax profit c £0.43m below expectations, but the FY ‘17 bottom line will benefit from materially lower running costs and new venues.

Divisional performances were mixed. Revenues from UK/German promotions and German retail were in line with management expectations, but UK Retail Merchandising Unit (RMU) sales were well below forecast and demand over the important Christmas period particularly weak. MPK revenues were also below budget, although partly due to delays in the scheduled roll out into new venues into 2017 where sites were not yet available. At £1.6m MPK revenues were still 138% up on the prior year.

The prelims should confirm a more positive FY17 outlook, underpinned by new venues including two shopping centres, leisure assets and three Network Rail stations. SAL renewed its promotional contract with MEC in Germany until December 2017 and reported a pipeline of other potential gains.

Our forecasts take these into account, but assume loss of venues where contracts are due for renewal in FY17, a flat performance by UK retail and lower revenue from German retail during the last year of the existing contract with ECE. That conservative outlook puts the group on track to deliver £0.7m adjusted FY17 pre-tax profit, 2.5p/share EPS and restore distributions at the year end.