SpaceandPeople Analyst Q&A: Recovery is in hand (LON:SAL)

SpaceandPeople plc (LON:SAL) is the topic of conversation when Zeus Capital’s Research Analyst Robin Byde caught up with DirectorsTalk for an exclusive interview.

Q1: I wanted you to talk to today about SpaceandPeople. What do they do and can you provide us a little bit of background to the company?


A1
: The company is a smaller business but operating in an interesting vertical and a very topical one at the moment. The company secures, sells, and manages pop-up shops and kiosks and arranges promotional events in shopping centres, public squares, and train stations. This is for a wide range of customers, including retailers and promoters and also property companies who own shopping centres.

Q2: In terms of trading, have they performed just lately? I’m guessing the COVID had some kind of affect?

A2: So, they recently reported their interims, the numbers were challenging frankly, revenue was down 72% to £1.1 million and the company reported a loss before taxation of £1.6 million but this was mainly as the business completely shut down for three months during the March national lockdown.

So, the key issues with these results, I guess, the first one is going concern, to put it bluntly is the company going bust, this looks unlikely as the company secured £1 million through the UK CBILS loan scheme, and actually the cash is in a better position than management has originally expected. So, the 30th of September, it was quite recently, the cash position was £1.6 million, now that’s compared £0.9 million for the same period the year before. The company has also achieved some good overhead cost savings so the cash position right now looks as if it’s at the low point.

Just a bit more on those costs savings so they stripped out £1.2 million in administrative costs so they reduced head count, they reorganised and streamlined and they’ve moved to new, frankly cheaper, offices in Glasgow and also they moved to new offices in Hamburg because they have a business in Germany too.

So, when the recovery starts to really kick in, operating margins could actually be structurally higher.

Q3: Now with recovery in mind, what opportunities are there for investors looking or potential investors looking at the company now?

A3: I think that’s a good point so current trading, we’re not back to normal but there are clear signs of recovery and management is saying that they are writing new business with good margins.

So, I think in terms of the recovery, there are three issues here. There’s the UK retail business, there’s the German retail busines so both of those divisions operate primarily in shopping malls and then there’s a UK rail station or train station business.

The UK railway station business primarily for Network Rail is, frankly, weak as you can imagine, with low passenger footfall through main stations such as London’s King’s cross and London Waterloo. It appears that business is going to remain in the doldrums for some time.

If you look at the German retail business, there’s actually been a pretty healthy recovery and footfall across Germany, indeed most recent German retail data indicates that footfall is above pre COVID levels, and SpaceandPeople are seeing healthy activity and healthy demand for their pop-up shops and kiosks.

UK retail is a little bit slower but is, nonetheless, recovering to.

I think, very obviously, with the ongoing COVID-19 restrictions across Europe, we have to be a bit cautious about the shape of the recovery but there is a recovery in hand.

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