Spaceandpeople (LSE:SAL) — Final Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the SPACEANDPEOPLE PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so, and these will be available via your investor meet company dashboard.

0:33 Before we begin, if I may, I would like to submit the following poll. And I'd now like to hand you over to CEO, Nancy Cullen. Good afternoon. Hi there. As described, I'm the CEO of SPACEANDPEOPLE, Nancy Cullen, and I'm accompanied by my CFO who is Gregor Dunley. Before we start our presentation of our end of year results, we thought we'd just take you through a quick introduction to the company just for anybody who's on this platform that doesn't know what we do. So if you can just put me through to the first slide. Thank you. So, essentially, we are Europe's largest agency supplying promotions and retail commercialization solutions into the retail property and transport sector. We've been around for twenty three years. We're a fully in house business, and we're market leaders in the sale of promotional spaces.

1:26 We have an operations division. We've got a warehouse in Essex and a team of staff who can deliver, install, maintain units. And we subject every booking that we make with our client venues to extensive due diligence and compliance procedures. And for that, we're fully ISO accredited. We're also market leaders in the provision of high value experiential activity. You may recognize some of the big venues on this list, but we represent many large UK shopping centers and also The UK London railway station network, includes Waterloo, Victoria, and Kings Cross. If you look at our services, there's four headings here, but the two to concentrate on are the brand experience business and the retail business, that being 80% of the bookings that we make.

2:18 Brand experience comes in a number of forms, major one off brand activations or road shows, which are traveling experiences that go around to different venues in the country, or they can just be brands of hand sampling. And if you look at retail, that also appears in lots of guises. We put long term retail kiosks into venues. We've got our own product called rock up and pop up, which is a product for new and online retailers. All the retailers can be supplied by the operator, or we put stuff, we put business into shop units. 20% of our business is also local business or customer acquisition. Just to show you what a brand x looks like, this is the Lion King at Manchester Piccadilly. Just an idea of a brand activating.

3:06 In 2022, just to give you an idea of the scale, we put 229 different brands into 216 venues. This is Sky Glass in Nottingham. This was for the Platinum Jubilee, just showing you. This is how brands activate can be indoor or outdoor. This is Super Drug at Kings Cross. And this is a roadshow that we put all around the country, which was the launch of a film for DC Super Pets. This is it in the Metro Center. And this is all now transacted via our sales staff, but we've also got an online platform that we launched last year. Talking about retail, as I said, we do retail in a number of forms. This is our own kiosk that we put into venues.

3:54 This is the network rail kiosk that we put onto network rail concourses. And it says here we placed over 440 different retailers into over a 160 venues last year. And the retail can also have its own kiosk. It can be a retailer who comes along with their own kiosk. It's just a few examples of the brands that put their own retail kiosks into our venues last year.

4:20 We're leading the market in trying to provide solutions to get new retail names into venues. And our latest product is one called Rock Up and Pop Up that we launched last year. This is a complete pop up solution where we manufacture and install the kiosk, do the business and merchandising plan for the retailer, supply them with staffing, supply them with payment equipment. They then trade, and then we remove the kiosk. And that is our unique rock up and pop up solution. And there's a few examples here of how it looks in action. These are a few of our kiosks in centers over the last twelve months.

5:07 So that's the introduction to the company. We're now gonna move on to the presentation to talk about our end of year results. And this is yet another rock up and pop up kiosk. This is Mindful Living at Lakeside. Greg, I can hand over to you financial highlights. Yes. Absolutely. Hello, everyone. Just to give you a brief run through of our 2022 results. We have shown them really in comparison with, 2019 and 2020 as well as the previous year to give an indication of how we're recovering back towards pre pandemic levels. You'll see that our revenue came in on expectation at 5,500,000, which was better than twenty twenty one's 4,000,000 and getting back towards where we were in 2019.

5:59 UK promotional retail and our German, or sorry, UK promotional revenue and our German retail revenue were very much back towards the pre pandemic levels with only UK retail, still significantly behind. And we'll come on to the reasons for that later on. Right. The result of that is that our core operating results were pretty much at a breakeven level.

6:27 And comparing that to last year when we stripped out the effect of government support that we had received, that was significantly better than we had done in the past couple of years and back almost to the levels we were at in 2019, which is encouraging that we are a viable business that's looking positively to the future, and hoping to deliver good results in 2023 as well. People will see that the net cash inflow of 500,000 is a little bit incongruous with our results given that we've also repaid a significant portion of our debt during 2022, but that's tied up in working capital movements, that we can explain in more detail if anybody is interested.

7:14 We finished the year with good cash headroom, and, we will continue to pay down our debt as planned during 2023.

7:29 So the operational highlights for us during the year, it was a strong performance even though q one was still affected by COVID. I mean, basically, we replaced the government support we had in 2021 with revenue in 2022. And, even though we still had a bit of COVID effect perhaps in January and February 2022. Pop up retail remained strong throughout the year, and we launched a new product in rock up and pop up. The brand experience took longer to return, but

8:00 we had a really strong in fact, we had our best ever December despite, rail strikes affecting some of our key stations, during that time. And we looked at our German business and took some first steps into, expanding that business with the developer ECE that we've worked with for the last seven or eight years, and we opened some units in Austria.

8:27 So looking at revenue, that increased in The UK by 41% to 3,000,000. And the retail revenue was slightly less than that, up 21. It should be pointed out that retail revenue for Space and People also includes promotional customer acquisition revenue that goes onto our mobile promotions kiosk. And customer acquisition revenue has been affected over the last twelve months by staff shortages and by overall economic conditions. So that didn't increase by quite as much as the promotional revenue.

9:02 As I said before, we launched our new retail product, Rockup and Popup, specifically designed to attract nascent online retailers and to grow them into kiosk users and hopefully into long term unit users. And we launched a new website resource for brands, to assist their research, which was our platform called experientialspace.co.uk, which features all the demographics and footfall of our key venues.

9:33 In Germany, we had a 48% increase in revenue and that was driven by an increase in the number of kiosks in operation. That went up from 56 to 78 during the year. We also managed to reduce costs in Germany by moving our office from Hamburg Airport into Central Hamburg and by reducing the headcount very slightly. And in Germany, it was the first time that we, as I said before, worked with ECE to put a trial of units into Austria using Germany, our German operation as the base. And we launched two retails in Zeesburg Shopping Center.

10:13 So looking at the outlook for SPACEANDPEOPLE, we see continued growth in The UK retail business, spearheaded through the development and rollout of our rock up and pop up kiosks. This is a real opportunity for the business. I think we're the only business in The UK which offer a complete solution, is staff included, and which can get you into a venue very quickly. It's a turnkey operation and then move you back out. And we're looking to grow that during the year. We've got a real focus on brand experience,

10:44 and adding some data metrics into that to improve traction with, agencies and to attract a higher amount of media spend into that area. We're keen to expand our German business further into Austria, and then we're also gonna look at additional territories. And, of course, we expect to return to profitability without the need for any further government support.

11:11 So just to summarize, our core operational performance continues to recover. We're getting back to pre pandemic levels, across the board. We've got a strong retail business. We've always had a strong retail business, but we've also got new initiatives to get new early stage retailers into The UK market. We're looking at a good BrandX business, and we think that this year we'll get back to pre pandemic levels. And, of course, we'll continue to look at international expansion opportunities as the year goes on. And we've employed a consultant to work with us on that.

11:51 The presentation that we've done for people, which will be available available on our website this afternoon, also some of the key profit and loss and cash flow figures on the back as well. There have been a number of questions submitted both in advance of the meeting and during the meeting. So Nancy and I are planning just to go through and answer as many of those as possible just now. Nancy, the first one's in relation to the purchase of shares through the employee share scheme through the employee benefit trust. So I'll take that one if you're okay with that. I am. The purpose of the scheme is to to buy shares against existing and future, employee share options.

12:39 When I say existing, it's none of the ones that predated 2022. But since then, the the benefit trust purchased about £50,000 worth of shares, which is just shy of 50,000 shares during the second half of, 2022. That's been disclosed in the financial statements, And they show up on our our balance sheet just now looking very much like treasury shares. So you'll see them on the bottom half of our balance sheet. There haven't been any more purchases since, the end of twenty twenty two.

13:17 But in the future, we will look to do that again when, you know, when it would be appropriate for us to do that. Nancy, next question is about network rail. How big a risk is the renewal of the contract?

13:33 How and how competitive may the tender be? Well, the answer to that is we don't know how competitive the tender will be because the documents aren't out yet. We've got a very good relationship with Network Rail. We've obviously worked with them throughout the pandemic and throughout the rail strike period. We've introduced lots of new products to them, and we've done quite a lot of operational work using our operational resource for them.

14:01 However, everyone's right to point out it's it's a contract which will be up for renewal this year, and we don't know how many people will be tendering for that. Okay. And the next So I carry on with what's the pipeline in Europe like? Yes. Thank you. So the pipeline in Europe, is obviously good because we haven't been in Europe, and, we don't believe there are any companies quite like us in Europe. However, we're very mindful, of our cost base and we're using Germany as the sort of, the point of contact for any European operations. Our first sort of very small steps are into Austria. We'll see how that goes and we'll take it from there. But, yes, Europe's very much in our sights.

14:51 K. The next question asks what the repayment schedule looks like for the COVID loans that we have. Some of you may remember that when the CBILS loans came out, we, first of all, took out a £1,000,000, loan term loan, to help us through that initial lockdown period. We also had a revolving credit facility of £1,000,000 at that time, which preexisted COVID, which we used as a working capital facility. Towards the end of the CBILS loan period, we took out a second CBILS loan of a further million pounds, which effectively replaced that revolving credit facility that we had.

15:40 And we also took out three quarters of £1,000,000 of overdraft facilities replacing the £500,000 overdraft facility that we had before. You see at the year end that, you just over 1,400,000 of those loans remain payable. Now the rate the repayment rate of roughly £350,000 a year, we will continue to pay that down in accordance with the the timeline that we have to pay that, which is slightly different for both loans. As at the year end and as at now, the the the loans are fully drawn down. However, the overdraft facilities are undrawn, and we have never been into those up until now.

16:28 The next question there is that we, are there any new sites in the near term pipeline or that we have recently signed up, Nancy, that we could announce? We've always got a pipeline of venues that we're talking to quite when they'll come to fruition. I couldn't answer you. But, yep, Cannon Street was a new location. And as I say, there's there's a long pipeline of venues that we're talking to at the moment, which we hope to, bring to fruition during the year. Okay. And then the next question is for the planned expansion in Germany and Austria, how much more capacity of warehousing people, etcetera, do we need? Okay. Shall I answer that one, Gregor?

17:13 Yes. Uh-huh. For the moment, we might add one more salesperson into Germany, but very little. I mean, our expansion into Austria has been done from our Munich base. We don't need any more warehousing. We think we might need one more salesperson. If we go into other territories, then, yeah, we might need to add a bit into our cost, but we're doing Austria as if it's just another state in Germany. So very cheaply done. The next question is, we are five months into the new year. Could we give any guidance on the performance of the year today other than we look to 2023 and beyond with confidence? Zeus have put out a note the this morning, gives some guidance on twenty twenty three's estimates from their perspective.

18:04 I think we would have to stick with that just now, but if anybody wants to get hold of that note, they can either approach us at SPACEANDPEOPLE for it or approach Zoosk directly to get it if they don't have it. There was then a question on the rock up and pop up part of our business, Nancy, where it was saying we have eight kiosks stated to be in operation by June this year. Do we have a view or a target for where we would like to be by the end of the year? Answer to that is yes. I would like to double that by the end of this year. However, you know, it's a very new product, and we've got to tread carefully, make sure our retailers are successful.

18:53 But the results we're getting out of it at the moment are very good. We've recently signed up with both Westfield and Trafford Centre to put kiosks into their venues, and hopefully, the retailers there will be successful. Most importantly is that we keep the kiosk occupied, rock up and pop up, we contract for about three months normally. So it's keeping the kiosk in the venue and putting new and different retailers in every quarter. Okay. The next question is there appears to be significant growth in RMUs and MPKs, quoting twenty twenty two against 21 numbers. Do you expect these levels to grow at the same rate during 2023? I can answer that one just from the 2023 budgets.

19:38 There was a real bounce back, especially in the RMU, the average RMU numbers, because in Germany, also coming out of the very final part of lockdown and growing again, they bounce back quite quickly. It's not just organic growth. It's being able to roll out things again that we had rolled out previously. So much as we're hoping to grow these numbers again during 2023, our expectation just now is not that they would grow at that same rate. Also, the RNUs are, in many instances, hopefully being replaced by the rock up and pop up kiosks, which are more desirable for a number of our clients and hopefully more profitable for us as well.

20:25 So once you add those in to the the mix too, you'll be able to see the proposed growth in our retail figures in the Zoos note and what they think about that. The next question is, we've reported one point six million of debtors past due and 1,345,000 greater than sixty days. Is this a normal working capital cycle or is there any future risk of impairment? That is a bit more elongated than we would normally have. There are a few debtors where we were still negotiating with them and venues about what credits, etcetera, needed to look like in relation to the the COVID period when they were weren't allowed to trade.

21:15 Since the year end, a lot of that has been tidied up. We believe that in our 2022 figures, made a very prudent assessment of what we thought, the likely risk would be on our trade debtors and provided accordingly. So I don't see any particular risk beyond that. The There's a question about the EBT? Yeah. I think that was probably covered off more of what I said earlier about the shares that we would look to do when, you know, when circumstances are are favorable for us to do that in the the future.

22:01 So the last one that I can see here is I agree with paying down the debt, a prudent approach. If 2023 goes as planned, do you envisage a resumption of dividends during '24, or is that some way off still? The I think that's some way off still. We are aware that over the last couple of years, there's been quite a significant hit to our distributable reserves as a result of that. Also, us having to make provisions against the carrying value of the investment in our retail division. Although it's a noncash item, we took a provision of 1,500,000 during this year.

22:47 That has had a significant effect on our distributable reserves and we will look to build those back. But the long term aim of the business, as I think was stated in George Watts' Chairman statement, is that we aim to get back to being able to pay a dividend when we can. We will pay down the debt but we don't anticipate having to have repaid every last penny of debt before we resume dividends if possible. Final question is about recalibration of the business if we didn't win the network rail contract? Network rail is a very important contract to us, one of our our largest contract. We as you would hope, from the board, we talk about this in detail, and we spoke about it with our our auditors at the year end about what the shape of the business would look like if we didn't have network rail.

23:44 It would affect our profitability, but it wouldn't give us an existential crisis. We've looked at what the shape of the business would be like going forward and how we would build back, and we are we are comfortable that that's that's fine. That's not to say that we are, not putting every effort possible into regaining that business. That looks like all the questions. Nancy, Gregor, absolutely. And thank you very much indeed for your presentation this afternoon and for being so generous of your time there and addressing all of those questions that came in from investors this afternoon. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended just for you to review and to then add any additional responses, of course, where it's appropriate to do so. And we'll publish all those responses out on the investor meet company platform.

24:33 But, Nancy, perhaps before I'm really just looking to redirect those on the call and to provide you with their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that'd be great. Yeah. As a business, obviously, we're excited about the future. We're looking to return the business to profitability, to carry out our international expansion, and to develop our new products further. I suppose all it all it comes to me say is thank you very much for your interest in SPACEANDPEOPLE. We do appreciate it. And if you've got any questions for Gregor or myself, then please do drop us an email on investor relations at SPACEANDPEOPLE dot co dot u k, and we'll be happy to answer them. But thank you very much in the short term for your time.

25:21 Nancy, that's great. And, Gregor, as well, thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of SPACEANDPEOPLE PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.