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SpaceandPeople: Building on solid UK presence

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). It provides a range of strategies and introduces retail and other brands which fit specific opportunities.

FY16 results were in line with the previously advised impact of a volatile trading period, which also included closures (S&P+), cost cuts and the one-off cost of a pilot mobile promotions kiosk (MPK) project in France. Beneath these, however, is evidence of progress vs a shortlist of strategic objectives designed to create a business model which is as robust and sustainable. Recent contract wins should strengthen the group’s competitive positioning and drive the benefits of a renewed focus on activities which fit its skillset, and optimise available management and financial resources.

Pre-tax losses (attributable to shareholders) were c £0.6m, or breakeven without some substantial one-offs - £0.7m of non-recurring costs - related to actions taken to reduce the cost base, carry out a pilot MPK project in France and close S&P+ in July. Actions taken to cut group running costs sought to bring them in line with the reduced business scale. SAL cut expenses by £0.6m pa, including lower payroll costs in retail and administration positions, and knocked another £0.1m off IT, travel and logistics. There was a 16% fall in like-for-like administrative expenses to £5.6m, which principally reflects restructuring in FY15, with some additional savings. Average employee numbers fell 14 to 118 in FY16 as the commercial and telesales staff complement was cut, mainly related to the S&P+ closure.

The FY17 statement remains relatively cautious, but looks ahead to more positive reports and confirms a strong start to 2017. As the group is emerging from a turbulent period we have taken a conservative view. Our forecasts do not include any material turnaround by weaker parts of the operation in Germany and assume steady performances by the group’s better placed UK segments.

The outlook is, however, underpinned by new venues added to a portfolio which extends to shopping centres, retail parks, leisure assets, major railway stations and airports. The next six months is arguably about restoring credibility and investors’ faith in management ability to deliver the kind of performance which will enable it to resume distributions. Evidence that the worst is behind SAL will be reflected in a higher share price and improved rating.