Spaceandpeople (LSE:SAL) — Interim results Investor Presentation

0:01 Good afternoon, and welcome to the SPACEANDPEOPLE PLC Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time using the Q and A tab. Just situate on the right hand corner of your screen. Just click Q and A, scroll to the bottom, type your question press send. Company may not be in a position to answer every question received during the meeting itself, and the company review all questions submitted today, and we'll publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Gregor Dunley, CFO, and Nancy Cullen, CEO. Good afternoon. Hey. Good afternoon. Good afternoon.

0:33 I was gonna start today with a short introduction to SPACEANDPEOPLE. I don't know how many of you on this call actually know what the company does, so I thought it might be worthless just covering off a few slides explaining the scope of the business. So SPACEANDPEOPLE is Europe's largest agency supplying promotions and commercialization into the retail property and transport sector. So we're we're the biggest in our market. We've been around twenty two years. And what we essentially do is simplify buying media space in venues in The UK and Germany. In 2019, and I've used 2019 figures because that was our last full year of trading, we do had global billings of 17,300,000. Everything we do, we do in house. We do our sales, all our compliance in house, and we've got a a fully a fully fledged operations division and a warehouse with a team of staff who can deliver, install, and maintain units.

1:31 We also do all the due diligence for all of the business that we put through our system, in house as well. Essentially, we are selling two major products, and I'll talk you through that in a moment. But we're market leaders in the provision of high value experiential brand experience space for all the properties listed on our service. And as you can see, we've got a number of ISO accreditations for the practices that we use in fully independent accounts. Just to give you an indication of some of the venues that we represent, some of the biggest and the best in The UK shopping center industry, so Lakeside, Meadowhall, Brent Cross, Metro Centre, you've probably heard of, and some of the most high profile railway stations such as Waterloo, Victoria, and Kings Cross.

2:19 And then this is just a sort of organogram of our services. 40% of what we do is brand, and that can be one of three types. It can be a roadshow, which goes around the country with a brand with a set piece roadshow. It can be sampling activity, or it can be one off sort of spectaculars. We do an awful lot of those at Waterloo Station, for example. So that's 40% of our business. Another 40% of our business is retail, and that has all sorts of different guises. It can be pop up retail. It can be long term retail, and it can be on units supplied by us, or it can be on units supplied by the operator. And then we also run businesses for local companies. We do displays for photographic companies, for car dealerships, etcetera, and a lot of customer acquisition campaigns for energy companies, charities, anybody basically who wants to sign up customers to sort of direct debit agreements.

3:17 And then we also do vending media, other other bits and pieces that our venues would like us to service for them. And when you look at the brand experience market, and I'm just gonna flick through a few photos here, this is the sort of activation that we do. I think I've so we put over 1,800 brand experiences into our venues in 2019. Again, I'm using 2019 because that was our last normalized year. But just a few pictures so you get an idea of the scope. So movie launches.

3:53 Oh, and I think I've got a Clinique brand experience here, which went into multiple venues. And I've got a a short video of other brand experiences that we can show later on. And when you look at pop up retail, in 2019, we placed over a 1,700 kiosk and pop up retail bookings into our venues. This is just an example of an outdoor kiosk that we did in a retail park. But we're also talking to major brands about doing kiosks. Stuff like Givenchy, Nespresso, Havaianas, Dyson, all big high street brands doing retail with us, as well as less well known brands such as Top Specs who do sort of funky reading glasses. So a huge range of retail going into our venues. And I'm gonna talk about a bit about this in our actual interim presentation, but our latest evolution of our service is something called Rock Up and Pop Up, which is a unique opportunity for nascent retailers to access venue space.

4:52 And, essentially, we do everything for them from the kiosk installation. We give them a kiosk. We install it for them. We do their business and merchandising plan. We can provide them with staffing. We can provide them with payment equipment, and then we take the kiosk away at the end of there to stay in any venue. And this allows a retailer just to turn up with a a box full of product essentially, and then we can get them into a venue of their choice.

5:21 And this is an example of that rock up and pop up. This was a Spanish footwear retailer. They only ever worked online, and this is how it looked on our kiosk when we put it into Lakeside. So just an example of the way in which we're evolving our retail services. And we're not just a telesales business. We drive business in a number of ways. We've got an e marketing division now, and we've also developed a range of landing pages. So if you type up pop up retail lakeside, for example, you'll get our pop up landing page where you can register interest for going into any one of our venues. So it's not just an outward sales business. We're also driving business through social media, through Instagram, through Facebook, and also through landing pages.

6:08 These are our, MPKs, which we'll talk about a bit later. We supply, install, and manage these, but, basically, we're keen on setting new standards for business. We don't like the idea of pop up banners in our venues, so we we've created these digital desks. And, people can just turn up. They presupply through the digital media, and then they can promote from our desks in any venue. And finally, we run a program from net specifically for Network Rail, which is a program which allows companies that are doing cultural historical or museums can come into the space in Network Rail venues free of charge and engage with the footfall, but Network Rail pay us to drive revenue in that respect.

6:55 So that's just a quick run through on what we do. If I can move us on to the investor presentation. Greg, can I hand over to you? Yes. I'll start that. Hello, everybody. Just to give you a run through of the financial highlights of, the first half of twenty twenty two. Coming out of the lockdown periods that deflected us during 2020 and 2021, there's been a significant recovery in the revenue that we've generated in the first half of twenty twenty two. Overall, across all divisions, we're up 190%, up to £2,400,000 of revenue compared to the £1,100,000 that we generated last year. Although that's better than it was before, we've highlighted that it's still significantly behind the pre pandemic net revenue of 3,800,000 that we achieved in the first half of twenty nineteen, and our short term aim is to try and recover to that level of revenue as quickly as we can.

8:00 The

8:02 level of gross profit goes up as a result of the increased revenue. That's just the the link to each other, up to 1,500,000 compared to 800,000 last year, but, again, still significantly below where we were pre pandemic. The reasons for that, we'll come on to and discuss when we talk about the divisional performance. This has led to us having a significant improvement in our operating loss when we strip out the government support that we've received over the past couple of years. We've had an operating loss in the first half year of £300,000. This is traditionally our poorer half year where we don't make any or any significant profit. We're very much a second half focused business in terms of our profitability.

8:51 Last year, our adjusted loss was

8:54 a million pounds, so we've improved significantly from that position, but we would hope to get back to a breakeven point sooner rather than later. We have net cash outflows in the first half year. If you look at our cash flow, we noted in our year end report that our cash position at the year end was substantially higher than we had expected it to be. That was because a number of our clients hadn't billed us for the revenue that we were supposed to hand on to them, after we'd taken our commission. So we had more cash at the year end than we thought. However, that has come down as we've paid these companies, what we owed them the first half of the year, and we're back to a more normalized position now.

9:42 Having done that, though, we still have significant cash headroom on our facilities, with 1,400,000 of headroom at the half year end and 1,600,000 as of close of play last week, which gives us more than sufficient headroom, to be able to conduct our our business. And so we we continue to pay down the bank debt, in line with our expectations. Nancy, do you want to move on to the next slide? Okay. So in terms of the operational highlights for the first half of this year, we're seeing a recovery in brand experience. It very much started off the year with a sort of sludgy brand experience sales.

10:28 And because of people's COVID fears that existed drifted from sort of January into March, Essentially, activity was sampling based. It's only only recently that we've seen the big activations come back, in fact, in the last month or so. However, we've had a strong recovery in the retail markets, and, obviously, that's that's been there since, lockdown ended. But we're building on that with this new full service kiosk retailing program, rock up and pop up, which we've launched in UK shopping centers this year, and we hope to have 10 units trading by the end of this year. We've also, looking at the brand market again, launched, a new website called experientialspace.co.uk.

11:14 This is a sort of data website which enables agencies to have 24 access to all of the information, demographics, footfall, spaces, and to do their planning online and then, give us a ring or go on to our online chat function to find out more about our venues. So it's a sort of just enhanced service for agencies and and gives the agencies the ability to compare sites easily and to make quicker bookings. And finally, we talked about the German business. The German business had a more difficult start to the year in that although they were open, their venues were open, you couldn't go in the venues without wearing a face mask or without showing your vaccination passport. So really, the German business has only been open since April 2022, properly.

12:04 We've got a short video just showing the kind of brand experiences that we put in in Network Rail in the second quarter of this year. So we're just gonna show you that before we go on to the next slide. Thank you.

13:56 To the divisional performance for the first half now as well. We'll just chat through that with you. First, on top of many of our business, The UK promotional part of our business, the revenue increased, quite substantially from only 800,000 last year to 1,200,000 this year. Really, that's been driven by

14:20 the availability of space for us to put in, put bookings into, with fewer closures during 2022 compared to 2021. We were able to get our kiosk retailers in and operating for the vast majority of that period, which helped with our revenue numbers. Brand experience, despite showing you the show you there of all the brand experience stuff that we did in q two, brand experience has been slower to recover. It's it takes longer for the bookers of that space to get themselves set and ready to do brand experience promotions and to to feel more comfortable to go back into that market after lockdowns. Although we are seeing that as, coming back strongly now, that certainly wasn't the case during the majority of the first half of the year.

15:11 So strong retailing and partially offset by poorer brand experience promotions than we had expected. On The UK, RMU and MPK side of things, revenue was up from a very low level in '21 to naught 600,000, this year. That was almost all in our our new market as the revenues were all operational for the majority of the time. As Nancy mentioned earlier, we do, charity bookings, and that's quite a strong revenue stream normally for our MPKs. That market has been very slow to recover and hasn't recovered in any meaningful way yet. So NPK revenue was still suppressed in the first half year, although we are expecting to see it coming back stronger in the second half year.

16:03 In Germany, our malls were closed for almost all of the first half year in 2021, only really opening in June. So it's no surprise to see revenue improving there. Although at naught 600,000, that's not going at full pace as if the malls had been open for the whole period.

16:25 Although we were able to trade in most malls for the majority of the time, a number of the RMUs weren't available because the the mall owners still wanted to have more space in their, in their open spaces, to allow for social distancing. In Germany, also, we were restricted by people only being able to enter the malls in the first quarter if they could prove their vaccination status and still wear face masks. So it's only really been towards the end of q two where we've seen the German add in new business start to come back more strongly. Overall, these results were in line with what we expected. There's there's nothing in there which has come as a surprise to us, and we we're very comfortable with that.

17:20 So if we look at the outlook for the business, we do we are seeing a recovery in brand experience, particularly over the summer months, and that looks set to continue into this second half. And we're seeing the beginnings of a recovery in that customer acquisition business, which is important for our future growth as as well as the Brand X. We're seeing good recovery in The UK retail business, although, obviously, we've now got this new product, which we think has got appeal to a whole a whole a whole lot of new retailers such as international retailers, high street retailers, and online retailers. So we're looking to really grow that UK retail business over the coming year.

18:06 We're looking at an expansion of the German retail business. There are plenty of other venues that we could be talking to in Germany, and we're also looking at new territories for the German business. And, obviously, we're working towards a return to profitability without government support and focusing on on repaying everything that we borrowed.

18:27 So a summary of where we are. There's been a good recovery in revenue post lockdown. We're continuing to focus on cost control. The only investments that we're making as a business is in sales staff. We're not looking at any administrative support at the moment. And we're looking to reduce our bank borrowings. And and we've got confidence in further business growth moving ahead. We're we're seeing that come back from the BrandX business, which is critical to our growth and a return to profitability.

18:59 That's fantastic. Thank you very much indeed for your presentation. Ladies and gentlemen, do please continue to submit your questions. I'm sure our team will take a few moments to review those questions already submitted today. I'd like to remind you that a recording of the presentation, only a copy of the slides and the published Q and A can be accessed via your Investor Week company dashboard. Guys, as you can see, we've received quite a few questions through. So what I'll do, if it's okay, is I'll read out the questions as we go along. And if could you just take them or or address them. The first one we've got here, would it be correct to say you exist in a highly fragmented market, high competition? Is market consolidation part of your growth strategy?

19:41 Mark oh, right. Sorry. I've just seen seen that question. We do exist in a highly fragmented market. However, we are the dominant force in that market. And actually, the fragmentation comes from and what we've got, you know, competition in brand experience and we've got competition in the retail markets. But actually, we are a complete solution for venues. I don't think we're looking at acquisition as part of our strategy in the short term. No. And if that's in relation to The UK market, in the German market, that's far less fragmented than The UK market. And just to touch on that, Gregor, I think there's another question that came in. Can you talk more about the potential for the expansion in Germany? Just following on that theme, if we could just tie that in, that'd be great.

20:29 Yes. Well, with Germany coming out of sort of lockdown or controlled periods later than The UK, we're still emerging from that and getting our retailers back up and running during q two and now into q three as well where we're continuing to recover. So there will be a lot of growth in our our German market, hopefully, in the coming years based on our existing portfolio and the ability for us to grow our portfolio both with ECE and with other venue owners in Germany. We have recently brought on a new non exec director that people will have seen from the RNS, a chap called John Scott, who has huge experience in international retail environments, and he will be invaluable in helping us to identify new opportunities both in Germany and other territories with The UK going forward. It is very much a focus of what we are looking to do to grow the business going forward.

21:27 That's great. Thank you. Wanted to hear about visibility and predictability of revenues in future years. How do you improve that going forward to normalize those earnings, make them more stable? Well, it's we're still have been in a very volatile period where we're anticipating revenues returning during the first half of twenty twenty two. And, yep, although we are we're happy that we that we got it right in terms of what our expectations were, There's obviously movements within that, but there are things that you don't expect to come through and things that you hope that would happen that have been a bit delayed still. As we get back to this level of revenue that we had before and more stability, especially on the brand experience side of things, our visibility of our pipeline will get stronger and stronger.

22:19 However, it will still remain that you this is booked at a relatively, short lead time on the brand experience side rather than the retail side. So there is only a a certain amount of visibility that we can have. But, generally, as the the climate improves for our traders and our promoters, we will see that coming back. Fantastic. Thank you. Another question we've got here is quite a long question, actually, I think one for for you, actually, Gregor. Are you able to disclose whether the take up of the employee benefit trust has been significant and approximately how many shares have been purchased through the scheme? If it's not been significant, are there reasons for why it hasn't been considering a lot of investors view the company to be significantly undervalued? If employees slash management believe in the prospects of the company, the take up should be quite high.

23:09 Okay. Well, the EBT has only very recently been set up, but it wasn't set up very much in advance of us going into a close period ahead of this result announcement. So it hasn't been active in buying any shares in in the market yet. What it's there to do is we we issue share options to to staff, due as part of our long term plan to retain important staff in the business. We like to issue share options to them where they get to benefit in in the future performance of the business if it's successful. The EBT will be purchasing shares in the market in order to satisfy the the need to grant these share options in or or or grant them the shares when the share option's best at time in the future.

23:57 So our anticipation is that we will go out into the market or or the EBT will go into the market rather in the coming months to to buy shares at that time if shares are available at an attractive price to it. None of the none of the options that this relates to will vest within the next three year period. So it has time in which to to make those purchases. That is purely what the EBT is for. It's not to do anything else. Fantastic. Thank you, Gregor. Nancy, think one that you have touched on, but I've got a question here. Approximately, what proportion of your revenues come from each of National Rail, Landsec into an ECE? Just if there are any other groups as well. I know we touched on those at the beginning of that introduction.

24:42 Yeah. Obviously, can't quote figures for each, but they are all significant clients as are British Land, LaSalle Asset Management, Global Mutual. We don't disclose the proportion of revenue they all represent, but, yeah, they're important groups, and the loss of any of those would be well, they're important to us, and the loss of any of them would be significant for the company. I mean, basically, that we'd have to reorganize. But the good thing is we do represent lots of major property groups, so we're not beholden to any single one of them. That's great. And just a proper sort of follow on here as well, Nancy. One key agreement, Network Rail is up for renewal very soon in March 2023.

25:28 Are you currently discussing renewal options? Will this be possible for a year agreement in your view, and what's the level of risk in not securing that renewal? Well, I think I answered you on the level of risk. They're one of our important clients. The timing of the repitch, we're not completely clear on at the moment. We're waiting for Network Rail to clarify that. And, yeah, of course, there is a risk as there is a risk with losing any of our major property groups. But, yes, that will be retended next year, and we understand it will be a multiyear contract. That's great. Thank you very much indeed. I think another one for you as well, Nancy. They're all coming your way. In relation to the e c e agreement on the RNS 05/06/2021 stated the agreement is for a five year period until April 26.

26:18 The number of RMUs included in the agreement is a minimum of 58 RMUs and 30 shopping centers with the aim of agreeing further venues and RMUs throughout the contract period. Group is looking forward to accelerating the number of RMUs in operation as soon as the venues reopen from lockdown. How's this progress been? And is there potential to expand into other geographic geographics with ECE? Their portfolio is really impressive, so it seems like an absolutely fabulous opportunity. Answer to that question, yes. ECE is a good opportunity for the business. I mean, obviously, the business only reopened properly in April, so it's a bit early for us to have made any major strides with it. But that said, we are looking at other venues with ECE, we are looking at other territories with ECE.

27:05 And as Gregor alluded to, we brought in John Scott, who's an ex international director for Debenham's, with a view to looking at our international business generally. That's great. Thank you, Nancy. Next one we've got here, are you currently exploring opportunities to expand the number of venues? Are you intended to focus on existing venues and instead focus on further developing the product offering, I. E, pop up shops and the like? Well, we've got plenty of space in our existing venues, and we've got new products. So we've got rock up and pop up, which is a big growth opportunity for us for next year. But we will always look as well as expanding the number of venues that we've got, particularly some of those major shopping centers that we haven't won. So, yeah, if any of those come up for repitch, we'll certainly be pitching for those.

27:52 That's great. Thank you. Next one we've got here is can you comment on the rationale for the share consolidation? Whose recommendation was this and how much were they compensated for? Always seemed illogical, unnecessary expense, and it seemed to have the opposite effect than that was intended with the liquidity now decreased further and the share price dropping circa 40%. Okay. I I can answer that one. The share consolidation exercise was a decision taken by the board rather than by any one individual or any external party. You know, the board believes still that it will improve our liquidity as we go forward. You know, since it's happened just in in June, you know, it's been a short period of time. There hasn't been any news flow. Markets have been suppressed.

28:43 So we're you know, we're not unduly concerned that it hasn't had a positive effect yet. We see that there's no news flow from us with any reason why our share price should have declined. So we we are happy that it was the right thing to do. In terms of the cost of it, it it was arranged at at very low cost, you know, at the a nonmaterial amount of money to do it. We were assisted by our registrars who have, you know, significant experience of of doing that, and the your cost wasn't really an issue. It was not very much at all. Hopefully, you know, as we go forward, we will see that this this has been the right thing to do. And the the pride, we believe that the price would have drifted anyway even if the consolidation hadn't happened given the macroeconomic climate just now.

29:36 It's up to us to deliver new good results for the business, increased revenue and profitability, and that's where we'll bring the share price up and increase our volume of trading as well. And I guess just one more we've got here. A solid h one, but how do see brand experience growing in h two and into 2023? Well, brand experience is still a very relevant method of marketing. It's a very cost effective way of marketing. A lot of the stuff that we put into our venues not only is a way for brands to engage with their audiences. It's also used as their advertising campaign. So they film it and use it for as their TV advertising campaign, and they also use it as their social media feed.

30:26 So we do see it as sort of playing a multifunctional role. And particularly when things are economically tight, it might be that people will move from above the line advertising to this very cost effective form of advertising. And, you know, this is a generation that are all about engagement and getting footage for their their media feeds. So, yeah, we we do see it coming back strongly. And, certainly, August has shown us that it can return figures approximating to what we were doing in 2019 and beyond. That's fantastic. Look, thank you very much indeed. I think you've addressed those questions. You can. Of course, any further questions that the company can see come through, we, of course, put responses to those where appropriate to do so and we'll publish those back out in the Investor Meet company platform. Nancy, perhaps before redirecting investors to provide you with their feedback, know it's particularly important to you and the team, I could just ask you for a few closing comments, please. Yeah. I mean, as we've alluded to, we are we are acutely aware of the economic headwinds that are facing this country and Germany at the moment.

31:29 But we're very focused as a business about getting ourselves back to profitability. We've got new products in the pipeline. We've got a new website that we're promoting, and we've obviously got opportunities overseas as well as in The UK. So we're reasonably confident moving forward that we will get ourselves back to profitability that we were achieving in previous years and beyond. That's fantastic. Nancy Gray, thanks indeed for updating investors today. Could I please ask investors not to close the session as we automatically redirect it to provide your feedback nor the team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure it's greatly valued by the team. On behalf of the management team, Space and People PLC, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you, and good afternoon. Thank you very much.