Positive update, dividend resumption
SpaceandPeople (SAL) 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 (over 750 venues with a weekly footfall of 70m).This morning’s pre-close trading update confirmed that SAL’s FY17 finished on a positive note. A strong final quarter meant that both pre-tax profit and cash generation were better than anticipated, and the latter prompted a proposed 1.5p/share final dividend, vs our 1.0p/share forecast.
Although FY17 overall should be broadly in line with expectations, year-end adjusted net cash of £1.9m (FY16: £0.4m net cash) is c £0.2m better than we had forecast. SAL has repaid all outstanding debt over the last 12 months despite a relatively challenging retail environment, but can still access £1.25m of undrawn facilities if required.
Whilst UK Promotions and German RMUs are likely to have been among the stronger areas in FY17, other components of SAP’s operations in Germany remain weak. We have reduced our FY18 forecast to reflect possible costs, related to prospective rationalisation and restructuring of that business. As, however, we don’t expect that to materially impact the group’s distribution capacity or indeed appetite, we forecast another 1.5p/share dividend for FY18.
Restoration of the dividend moves the shares onto a prospective 4.5% yield, covered by forecast EPS and cash generation, both of which have been beneficiaries of recent focus on improving individual divisional profitability and productivity, to create sustainable revenues and margins. The results should provide clarity on country and divisional performances, as well as progress on the roll out of Mobile Promotions Kiosks, and Brand Experiences on behalf of significant new clients secured over the last 18 months. The £1.9m year-end net cash represents significant underpinning for the shares at the current price, and reassurance regarding SAP’s ability to deliver its planned strategy.
SpaceandPeople is engaged in the marketing and selling of promotional and retail licensing space on behalf of shopping centres and other venues throughout the U.K. and Germany and also in India. Co.'s segments include promotional sales and retail, and other. Through its subsidiaries, Co. is involved in licensing of intellectual property, media, and leasing of retail merchandising units.
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