SpaceandPeople: Continued turnaround in fortunes
The group has issued a positive trading statement, which covers the first four months of the current year. It suggests that actions taken by management over the past 12-18 months have progressively steadied the ship.UK Promotions made a better than anticipated start to the year, and SAL has renegotiated its German retail division’s contract with ECE, which will reduce rental charges. That combination of higher revenues and lower costs results in projected FY17 pre-tax profit which is above our previous forecasts, and year-end net cash of c £1.25m.
SAL has built on the beneficial effect of restructuring during 2016. With a full staff complement and a stronger client list it traded well in January, which has put it back on track after a slower finish to 2016 prompted a more cautious outlook.
We have upgraded our FY17e pre-tax profit forecast to £1.1m (£0.7m previously), post-tax profit to c £0.8m, and basic EPS to 4.3p. We expect strong cash generation to continue.
Although the statement expressed confidence that the strong start to 2017 will be maintained throughout the year, we have held our dividend forecast. The projected distribution is comfortably covered, but we expect management to revisit this as the year progresses. Group trading/revenues are weighted towards the second-half, so any decision in that respect will await clarity on H2 trading.
The update prompted a 45% increase in the share price. Management is gradually regaining investor confidence, so further positive news regarding sales and margins should generate further outperformance and a commensurate improvement in the rating.
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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