SpaceandPeople PLC Pre-Close Trading Update (6022T)

TIDMSAL

RNS Number : 6022T

SpaceandPeople PLC

09 January 2017

SpaceandPeople plc

("SpaceandPeople" or the "Group")

Pre-Close Trading Update

SpaceandPeople, (AIM:SAL) the retail, promotional and brand experience specialist, today issues a pre-close trading update ahead of its preliminary results for the year ended 31 December 2016, which will be released on 27 March 2017.

Trading during the key month of December was poorer than expected. Revenues for the year from the promotional divisions and the German retail division were in line with management expectations, however, Retail Merchandising Unit ("RMU") sales were significantly lower than had been anticipated with demand over the normally lucrative Christmas period being particularly weak. Revenue from the Mobile Promotion Kiosk ("MPK") business was lower than had been budgeted as the roll out of units to new venues was delayed from the fourth quarter of 2016 into 2017 due to site availability, although this still represented a 138% increase on the previous year at GBP1.6 million (2015: GBP656k). Overall, revenue for the year was GBP700k lower than expected at GBP10.2 million and the impact of this on the profitability of the Group is a reduction of approximately GBP425k from market expectations.

Additionally, the Group has decided to make provisions for the restructuring of both the UK and German retail divisions with GBP90k of restructuring costs and GBP150k of provision for potential bad debts as we enter the final year of our contract with ECE.

Therefore, the Group expects the results for 2016 to be close to break even before non-recurring costs and discontinued operations and a loss of circa GBP650k after recognising all costs.

Non-recurring costs and discontinued operations:

   Closure of S&P+ Ltd        GBP400k 
   MPK France pilot             GBP125k 
   Restructuring costs         GBP175k 
   Total                                      GBP700k 

The net cash position at the year-end was GBP250k (2015: GBP723k).

New Venues

Whilst the market landscape is challenging, the Group has been awarded several new venue gains in December, including the:

-- Bromley Shopping Centre (formerly Intu Bromley) following it being acquired by one of our clients;

   --     Land Securities Leisure portfolio of 15 venues; 
   --     Kirkgate Shopping Centre in Bradford; 

-- addition of London Bridge, Euston and Paddington to our portfolio of Network Rail stations following the completion of their renovations and reconfiguration of space allowing commercialisation activities to take place; and

   --     renewal of our promotional contract with MEC in Germany until December 2017. 

There are a number of further potential gains in the pipeline and the ability to grow the UK business further is strong.

Outlook for 2017

The Board is confident that the addition of these new venues will deliver increased revenue to the UK divisions in 2017, however, forecasts for 2017 have also taken account of the fact there are a few venues whose contracts are due to be renewed during 2017 and provision has been made to account for the possibility that these may not all be renewed.

Over recent years there has been a decline in the scale of the RMU businesses in both the UK and Germany. We are taking action to replace lost business, especially in the UK and we have also reduced the cost base of these divisions to mitigate the effect on profitability. We are not budgeting for any recovery in the UK retail business in 2017 and our expectation is that revenue in the German retail division will decline in what is the final year of the existing contract with ECE as we are phasing out unprofitable units.

During 2016 the Group undertook a major cost reduction programme. Although this incurred costs in 2016 it has materially reduced the running costs of the business going forward.

Costs:

 
 Reduction in payroll due to              GBP650k 
  streamlined management and 
  headcount reductions to reflect 
  the reduced size of the retail 
  divisions 
 Overhead reductions due to               GBP100k 
  savings in IT, travel and logistics 
 Non-recurring costs of S&P+              GBP700k 
  closure, French MPK pilot and 
  restructuring 
 Total                                  GBP1,450k 
 

The effect of the new contract wins, whilst taking account of potential contract losses and declining German retail revenues as well as the benefits arising from the closure of S&P+ and the restructuring programming undertaken provides the Board with sufficient confidence that the Group will not only return to profitability in 2017 but will also meet existing broker expectations for 2017.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Contact details:

 
SpaceandPeople Plc                              0845 241 8215 
Matthew Bending, Gregor Dunlay 
Cantor Fitzgerald Europe                        020 7894 7000 
David Foreman, Will Goode (Corporate Finance) 
David Banks, Richard Sloss (Sales) 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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January 09, 2017 02:00 ET (07:00 GMT)