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SPACEANDPEOPLE PLC NEX:SAL.GB NEX Ordinary Share GB00B058DS79
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SpaceandPeople PLC Preliminary Results

25/03/2019 7:00am

UK Regulatory (RNS & others)


SPACEANDPEOPLE (NEX:SAL.GB)
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RNS Number : 7774T

SpaceandPeople PLC

25 March 2019

SpaceandPeople plc

("SpaceandPeople" and the "Company")

Preliminary Results

SpaceandPeople, the retail, promotional and brand experience specialist, is pleased to announce its preliminary results for the 12 months ended 31 December 2018.

Financial Highlights

   --           Gross revenue of GBP18.8 million (2017: GBP22.4 million) 
   --           Net revenue of GBP7.9 million (2017: GBP10.0 million) 

-- Loss before taxation and non-recurring items attributable to shareholders of GBP0.1million (2017: GBP1.2 million profit)

   --           Basic Earnings per Share before non-recurring costs of (2.2)p (2017: 4.8p) 
   --           Cash at year end of GBP0.8 million with no bank borrowing (2017: GBP2.7 million) 
   --           Proposed dividend of 0.5p per share (2017: 1.5p) 

Operational Highlights

   --           Continued focus on core UK and German markets 

-- Challenging trading conditions in all divisions, but with pleasing contract renewals during the year with Landsec and M&G in the UK

   --           Continued programme of costs reduction 
   --           Strengthening of senior team creating good opportunities 

-- Hammerson contract win (UK) and ECE contract extension (Germany) since the start of 2019

Contact details:

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

Chairman's Statement

Firstly, I am delighted to have taken on the Chairmanship of the Group during 2018 and on behalf of the Board I would firstly like to thank my predecessor, Charles Hammond, for his service to the Group and stewardship during that time.

During 2017, we maintained our focus on our core UK and German markets. We continued this strategy in 2018 and have successfully renewed our agreements with Landsec and M&G Investments in the UK and with ECE in Germany. In addition, we recently announced the signing of a new agreement with Hammerson plc in the UK which will provide additional opportunities for both parties.

Even though these agreements were renewed, as explained to you during 2018, trading conditions in both the UK and Germany were difficult due to a number of reasons. Unusual weather conditions with severe snow storms in the first quarter of the year followed by a long, hot summer in both the UK and Germany disrupted normal trade in venues. In addition, the World Cup over the summer distracted brands from focusing on their usual activity with us. Although normal conditions returned during the autumn and winter, we were unable to recover from the slow start to the year and a poor period of trading in the key month of December meant that the Group delivered a small operating loss on recurring activities for the year as a whole.

Notwithstanding these disappointing results, the Board will propose a dividend of 0.5p per share at the upcoming AGM.

Despite 2018 having been a difficult year, we look forward to 2019 with confidence following management's success in securing new agreements and successfully renewing other agreements on good terms.

I would like to thank the executive directors, the senior management team and all staff across the business for all their hard work during 2018 and I am confident that this will continue and lead to a successful 2019.

George Watt

Chairman

22 March 2019

Strategic Report

Principal Activities

The principal activity of the Group is the marketing and selling of promotional and retail licensing space on behalf of shopping centres, retail parks, railway stations and other venues throughout the UK and Germany.

The strategy, objectives and business model of the Group are developed by the executive directors and the senior management team, and then approved by the Board. The management team, led by the Chief Executive Officer, is responsible for implementing the strategy and managing the business at an operational level.

The Group has a diverse portfolio of shopping centre, railway station, retail park and airport clients. The Group continuously looks for new clients and potential revenue streams to help grow and diversify the business and deliver sustainable growth in value for shareholders.

Review of Business and Future Developments

The results for the period and the financial position of the Group are shown in the financial statements.

The review of the business and a summary of future developments are included in the Chairman's Statement, the Chief Executive Officer's Review and the Operating and Financial Review.

Principal Risks and Uncertainties

The principal risks identified in the business are:

Loss of client(s) - Each year a number of the Group's contracts with clients come to an end. At this point, some are renewed, some are not renewed and others are renegotiated. When the amount of business that we transact with an established client reduces, it can take time to replace this income with business from new clients. The Group is not overly reliant on any single client and the loss of a significant client, although unwelcome, would not put the viability of the business at risk.

Credit risk - The Group is exposed to credit risk from its operating activities, namely its trade receivables. This risk is mitigated through is managed by undertaking regular credit evaluations of its customers. The Group applies the IFRS 9 simplified approach to measuring expected credit losses on trade receivables. To measure the expected credit losses, trade receivables were considered on a days past due basis. The expected loss rates are based on the Group's historical default rates adjusted for forward looking estimates. The identified impairment loss arising following the application of the expected credit loss model was not material to these financial statements. Trade receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include the failure of a debtor to enter into a repayment plan with the Group and a failure to make agreed contractual payments. Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of any amounts are written off and credited against the same line item.

Loss of key personnel - The unexpected loss of a member of our senior management team could have a negative effect on the business in the short term, however, we have a management team of eight members who are encouraged and required to engage with and assist their colleagues in other areas of the business to ensure that understanding and exchange of ideas is a core element of their roles. This ensures that the business is not at risk while we seek to replace the member or conduct a reorganisation of the team.

System failure - Whilst no guarantees can be given that all possible eventualities are covered, the Group has comprehensive and strict policies and contingency plans concerning power outages, telecommunications failure, virus protection, hardware and software failure, frequent and full offsite backup of all data and disaster recovery. Contracts and service level agreements are in place with reputable suppliers to ensure that any disruption and risk to the business is kept to an absolute minimum. The adequacy and appropriateness of these policies and plans are reviewed on a regular basis. Significant hardware and systems upgrades were completed during 2018 and a strengthened disaster recovery process was established in early 2019.

Legal claims - The Group constantly reviews its exposure to possible legal claims and takes appropriate advice and action to protect both itself and its clients where any avoidable risk is identified, for example, by amending terms and conditions, service agreements, licences and risk assessments.

Health & Safety - The health and safety of our employees and any visitors to any of our sites is of utmost importance. We are fully committed to complying with all relevant laws and regulations in order to provide a safe and health environment. The Group is currently working towards ISO 45001 certification which is proactively improving our occupational health and safety systems.

Cyber Security - The Group has robust systems in place to protect all data held on its IT systems. All corporate and personal data relating to clients, licensees and staff is held on secure servers, in encrypted files and behind robust firewalls. The appropriateness and effectiveness of our cyber security is tested by external advisors on a regular basis.

Financial Reporting - A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. This budget is revised twice throughout the year and performance against the budget and forecasts is reviewed by the management team on a monthly basis and by the Board at each Board meeting. If the Board believes that as a result of the performance to date during the year, or as a result of any changes to the forecasts for the remainder of the year, the results of the Group are likely to differ materially from the results that are expected by the market, the Board will communicate this to the market at the earliest possible opportunity. The Group places a high priority on regular communications with its various stakeholder groups and aims to ensure that all communications concerning the Group's activities are clear, fair and accurate. The Group's website is regularly updated and announcements or details of presentations and events are posted onto the website.

Banking Covenants - The Group has a number of banking covenants in relation to its borrowing facilities. The Group's compliance with these covenants is assessed on an ongoing basis and any actual or potential breach is communicated to the Board and all other relevant parties as required.

Brexit - Given the current uncertainty surrounding the UK's departure from the EU, the Group has reviewed its potential exposure to the most likely exit scenarios. Although the Group has two subsidiaries based in Germany, there is no cross-border trade between the companies and as a result, the physical and logistical impact of Brexit is unlikely to have a significant impact on the operations of the Group. The possible macro-economic impacts of Brexit are more likely to affect the performance of the Group and the Board and staff will look to react to any situation at the earliest opportunity.

Key Performance Indicators

The key performance indicators are:

 
                                                       2018   2017 
 
 Gross revenue (GBP million)                           18.8   22.4 
                                                     ------  ----- 
 Net revenue (GBP million)                              7.9   10.0 
                                                     ------  ----- 
 (Loss) / profit before taxation and non-recurring 
  costs attributable to shareholders (GBP 
  million)                                            (0.1)    1.2 
                                                     ------  ----- 
 Basic (loss) / earnings per share before 
  non-recurring costs (p)                             (2.2)    4.8 
                                                     ------  ----- 
 Proposed dividend (p)                                  0.5    1.5 
                                                     ------  ----- 
 Average number of Retail Merchandising 
  Units (RMUs)                                          158    185 
                                                     ------  ----- 
 Average number of Mobile Promotions Kiosks 
  (MPKs)                                                 60     75 
                                                     ------  ----- 
 

By order of the Board

Gregor Dunlay

Company Secretary

22 March 2019

Chief Executive Officer's Review

2018 demonstrated that when tactical advertising budgets are withheld from a service business whose main overhead is staffing costs, the results fall straight to the bottom line.

The key reasons for the poor performance were:

1. Bad weather in Q1: The 'Beast from the East' hit UK sales for two months, even though it lasted three days;

2. Good weather in Q2 and Q3: Brands looked for outdoors locations that we could not source at such short notice;

3. The World Cup. A decent run by participating home nations led to the country tuning in to football to the exclusion of much else;

4. Investment in improving our service and staff. This investment was aimed at expansion and this cost increase coincided with a decrease in sales; and

   5.     A tough retail backdrop in the UK with a loss of venues due to ownership changes. 

Ultimately, sales did not match forecasts and we could not cut costs quickly enough to counteract the situation to any appreciable degree. We had anticipated a continuation of 2017's success but this did not occur for the reasons explained above.

The poor performance does not reflect the hard work put in by all of our teams and I am grateful to them for their continued efforts and commitment, despite commission payments being curtailed, bonus payments being restricted or stopped and pay freezes being implemented.

In SpaceandPeople Germany, we have cut annualised costs by circa EUR0.4 million by reducing headcount. This reduced cost base in 2019 and sales maintained at a level similar to 2018 will produce significantly increased levels of profit. Furthermore, office lease costs will reduce in 2019 as the lease on a large and relatively expensive office in Hamburg will not be renewed in August, reducing costs in both SpaceandPeople and POP Retail in Germany. With no formal contracts in place, we do not see the German promotions business making positive progress unless new business materialises. As we have legacy revenues for the next 18 months, the business will continue to trade for at least the short-term and the remaining staff will concentrate on delivering more RMU opportunities for POP Retail Germany.

In Pop Retail Germany, RMUs being placed in key locations did not happen timeously enough for retailers to respond. The subsequent renegotiation and extension to the contract with our key client in Germany, ECE, has addressed this variability. With the recent pilot programmes with DI Group and HBB Group announced post year-end, we can see improved margins and increased profits from this division in 2019. As a result of the improved margins and reduced overheads across the two German divisions we are confident they will deliver a positive contribution to Group cash flow in 2019.

The UK is, and will continue to be, the revenue and profit driver for the Group, despite a difficult year which saw total Group revenues drop to GBP7.9 million from GBP10.0 million in 2017, mainly due to the extenuating circumstances explained above. Since the end of 2018 we have been awarded a new, multi-year contract with Hammerson in the UK, and our investment in venue development personnel is delivering a good new venues pipeline in the UK.

The MPK roll-out programme in the UK stalled at 60 units compared with 68 units in 2017 due to a lack of new venues and revenue plateaued as a result. The Hammerson contract will see us deliver 10 new MPKs in high footfall locations and the booking pipeline is currently strong for 2019.

Overall, you will be pleased to note that staff are motivated and we can see the UK and Germany regaining lost ground in both new venues and revenues compared with 2018. Despite the uncertain macro-economic backdrop, trading in all divisions for the first three months is currently in line with management expectations and ahead of the comparable period in 2018.

The Board has also decided to write-off the goodwill in relation to SpaceandPeople India of GBP0.24 million. This has no cash impact on the Group. We still retain a majority shareholding in this business and it is continuing to trade at an acceptable level. New location wins at three regional airports has seen the number of kiosks increase to 34, and we hope that in 2019 it will become profitable. We would like to reassure shareholders that this is not a distraction from our core businesses and our involvement amounts to occasional marketing support and two visits per year from Gregor Dunlay or me. It is our intention to sell the business to Indian investors when the business can demonstrate that it is profitable.

Towards the end of the year, we announced a contract with MG Malls, the largest independent out-of-home media business in the USA, to represent SpaceandPeople in North America. The contract is for an initial 12-month term which enables MG Malls to discuss SpaceandPeople products and services with US mall owners and operators exclusively. Work continues with MG Malls and the latest post-year update showed a positive response to presentations by many mall groups. Follow-up discussions are planned and we will keep the market updated, as appropriate.

In 2019 the UK business is aiming to gain certification for ISO 9001 (Quality Management Systems), ISO 14001 (Environmental Management) and ISO 45001 (Occupational Health and Safety). It is important for our business to comply with these standards in order to demonstrate to all stakeholders that proper operating systems are followed and that we comply with best practice in relation to our environmental impact and health and safety procedures.

Despite the disappointing performance in 2018, our strong cash position, improved expectations for 2019 and a good pipeline of potential new business gives us the confidence to announce a dividend of 0.5p per share, subject to shareholder approval at the AGM.

Matthew Bending

Chief Executive Officer

22 March 2019

Operating and Financial Review

The principal focus of the Group during 2018 was to continue the concentration of efforts on our core business units.

All divisions delivered lower revenue than in the previous year. UK promotional revenue fell by 12% and operating profit before non-recurring costs by 68% to GBP0.4 million compared with 2017. This was principally the result of adverse weather conditions, the effect of the football World Cup and the difficult UK trading environment. Retail revenue fell by 11%, however, operating profit increased by 23% to GBP0.5 million due to reduced administration costs.

German retail revenue fell by 38% due to a planned further decrease in the number of RMUs in operation coupled with disappointing occupancy rates. Profitability fell from an operating profit of GBP0.2 million in 2017 to a loss of GBP0.3 million in 2018. Revenue in the German promotional division fell by 54% as the ending of the agreement with MEC Group meant that this division no longer had any exclusive venue partners. Consequently, overheads have been reduced by a further GBP0.3 million which resulted in the division making an operating loss of GBP0.2 million compared with a break-even position in the previous year.

Revenue

Gross revenue generated on behalf of our clients was GBP18.8 million in 2018, which was GBP3.6 million (16%) lower than like for like gross revenue in the previous year. This was due to further reductions in German promotional and retail revenue where gross revenue fell by GBP1.2 million, UK retail revenue, which fell by GBP0.4 million and UK promotional revenue, which fell by GBP2.0 million. Despite gross revenue falling by 16%, net revenue fell by 21% to GBP7.9 million as the UK promotional division achieved a lower blended commission rate than in the previous year.

Within the UK promotional division Brand Experience revenue was hit particularly hard with net revenue falling 17% compared with the previous year due to the weather and the effects of the World Cup.

UK retail revenue fell by GBP0.4 million to GBP3.1 million in 2018. This was largely due to a fall of GBP0.3 million in RMU revenue as a result of a decrease in the average number of RMUs in operation from 91 to 74 units.

Administrative Expenses

Due to a targeted reduction in admin headcount, administrative expenses of the Group were GBP0.3 million (8%) lower than in the previous year even after accounting for the recruitment of key personnel targeted with venue development and key account management.

The average number of people employed in the business fell by 7 to 92 in 2018. This was primarily due to a reduction in the number of administrative staff from 32 to 27.

Profit

Operating loss before non-recurring items of GBP0.2 million represented a fall of GBP1.4 million on the previous year (2017: profit of GBP1.2million).

Basic Earnings per Share ("EPS") fell to negative 2.2p (2017: positive 4.8p). Fully diluted EPS fell to negative 2.2p (2017: positive 4.3p). Basic EPS is calculated as profit after tax and before non-recurring costs attributable to the owners of the Company divided by the weighted average number of shares in issue during the year which was 19,519,563 (2017: 19,519,563). Fully diluted EPS also takes into account the number of shares that would be issued on the exercise of outstanding share options. The weighted average number of shares used to calculate the diluted EPS was 21,548,024 (2017: 21,840,060). Where EPS is negative, dilution is not permitted to reduce the negative EPS

Cash Flow

The Group cash outflow from operating activities was GBP1.4 million (2017: inflow of GBP2.6 million). This was largely due to a GBP1.4 million reduction in amounts payable as the unusually high level of trade and other payables at the end of 2017 was reduced during 2018. During the year GBP0.1 million was spent on fixed assets as the UK divisions finalised their bespoke CRM systems. A dividend of GBP0.3 million was also paid during the year. Consequently, the cash position was GBP1.8 million lower at the end of 2018 than 2017.

During 2018 the Group changed its principal banker from Lloyds Banking Group to Santander UK. This decision was taken due to the suitability and competitiveness of Santander's lending proposal for the Group's working capital facility and we are delighted to be working with them.

Dividends

The Board is proposing a final dividend of 0.5p per share at the Annual General Meeting on 24 April 2019. If approved, this will be paid on 25 April 2019.

Gregor Dunlay

Chief Financial Officer

22 March 2019

Corporate Governance Report

Introduction

SpaceandPeople plc is listed on the AIM Market of the London Stock Exchange and therefore is not required to comply with the provisions of the UK Corporate Governance Code (the "Code") issued in October 2012. However, the Board is committed to high standards of corporate governance and has established governance procedures and policies that are considered appropriate to the nature and size of the Group. The Board considers that at this stage in the Group's development the expense and practicalities of full compliance with the Code is not appropriate. This report sets out the procedures and systems currently in place and explains why the Board considers them to be effective. The Board is committed to reviewing our requirement to comply with the Code on a regular basis.

The Board

The Code requires the Company to have an effective Board which is collectively responsible for the long-term success of the Company through leadership within a framework of controls that assess and manage risk.

The Board currently comprises three Executive Directors and two independent Non-Executive Directors including a Non-Executive Chairman who is responsible for leadership by the Board and ensuring all aspects of its role.

George Watt is Chairman of the Group and Matthew Bending is Chief Executive Officer. Matthew is also one of the founders of SpaceandPeople and is a significant shareholder. It is his responsibility to ensure that the strategic and financial objectives of the Group as agreed by the Board are delivered. The Board's two Non-Executive Directors act as a sounding board and challenge the Executive Directors both at formal Board meetings and on a regular and informal basis concerning the performance of management in meeting agreed goals and objectives. Each member of the Board brings different experience and skills to the Board and its various committees. The Board composition is kept under review as this mix of skills and business experience is a major contributing factor to the proper functioning of the Board, helping to ensure matters are fully debated and that no individual or group dominates the Board decision-making process.

Matters referred to the Board are considered by the Board as a whole and no one individual has unrestricted powers of decision. Matters that require the Board's specific approval include Group strategy, annual budgets and forecasts, acquisitions, disposals, annual reports, interim statements, changes to the Group's capital structure, significant funding requirements and nominations for Board and Committee appointments.

Where Directors have concerns, which cannot be resolved in connection with the running of the Group or a proposed action, their concerns would be recorded in the Board minutes. This course of action has not been required to date. The Directors can obtain independent professional advice at the Company's own expense in performance of their duties as Directors.

The Group's Directors are evaluated each year by way of peer appraisal. The appraisal seeks to determine the effectiveness and performance of each member with regards to their specific roles as well as their role as a Board member in general.

The appraisal system seeks to identify areas of concern and make recommendations for any training or development to enable the Board member to meet their objectives which will be set for the following year. The appraisal process will also review the progress made against prior year targets to ensure any identified skill gaps are addressed.

Whilst the Board considers this evaluation process is currently best carried out internally, the Board will keep this under review and may consider independent external evaluation reviews in the future.

As well as the appraisal process, the Board monitor the Non-executive Directors' status as independent to ensure a suitable balance of independent Non-executive and Executive Directors remains in place.

The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board and for succession planning. Succession planning is formally considered by the Board on an annual basis, in conjunction with the appraisal process.

Each year at the Annual General Meeting one-third of the Directors are required to retire by rotation, provided all Directors are subject to re-election at intervals of no more than three years. This year Matthew Bending and Gregor Dunlay are scheduled to retire by rotation. Both Directors have confirmed their willingness to be put forward for re-election.

The Board has established two committees to deal with specific aspects of the Board's affairs: Audit and Remuneration Committees.

Attendance at Board and Committee Meetings

Attendance of Directors at Board and Committee meetings convened in the year, along with the number of meetings that they were invited to attend, are set out below:

 
                                       Board         Remuneration          Audit 
                                                       Committee         Committee 
                                  Held   Attended   Held   Attended   Held   Attended 
 C G Hammond - Non-Executive 
  Chairman(1)                        4          4      2          2      1          1 
 M J Bending - Chief Executive 
  Officer                            8          8      -          -      -          - 
 N J Cullen - Chief Operating 
  Officer                            8          8      -          -      -          - 
 G R Dunlay - Chief Financial 
  Officer                            8          8      -          -      -          - 
 S R Curtis - Non-Executive 
  Director                           8          7      2          2      1          1 
 W G Watt - Non-Executive 
  Chairman(2)                        8          8      2          2      2          2 
 

(1) Resigned on 29 June 2018

(2) Appointed on 29 June 2018

Audit Committee

The Audit Committee comprises George Watt (Chairman) and Steve Curtis. The Board considers that the members of the Committee have recent and relevant financial experience. If required, the Committee is entitled to request independent advice at the Company's expense for it to effectively discharge its responsibilities.

The Committee's main role and responsibilities are to:

   --      monitor the integrity of the financial statements of the Group; 
   --      review the Group's arrangements in relation to whistleblowing and fraud; 

-- make recommendations to the Board to be put to shareholders for approval at the AGM, in relation to the appointment of the Company's external Auditor;

-- discuss the nature, extent and timing of the external Auditor's procedures and findings; and

-- report to the Board whatever recommendations it deems appropriate on any area within its remit where action or improvement is needed.

The Committee is scheduled to meet twice in each financial year and at other times if necessary.

Internal control procedures

The Board is responsible for the Group's system of internal controls and risk management and has established systems to ensure that an appropriate level of oversight and control is provided. The systems are reviewed for effectiveness annually by the Audit Committee and the Board. The Group's systems of internal control are designed to help the business meet its objectives by appropriately managing, rather than eliminating, the risks to those objectives, and to provide reasonable, but not absolute assurance against material misstatement or loss. Executive Directors and senior management meet to review both the risks facing the business and the controls established to minimise those risks and their effectiveness in operation on an on-going basis. The aim of these reviews is to provide reasonable assurance that material risks and problems are identified and appropriate action is taken at an early stage.

Relations with shareholders

The Board recognises the importance of regular and effective communication with shareholders. The primary forms of communication are:

   --      the annual and interim financial statements; 
   --      investor and analyst presentations and discussions; 
   --      announcements released to the London Stock Exchange; and 
   --      the Annual General Meeting. 

Remuneration Report

Remuneration Committee

The Group has a Remuneration Committee comprising two Non-Executive Directors, Steve Curtis (Chairman) and George Watt.

The Committee's main roles and responsibilities are to:

-- determine and agree with the Board the remuneration of the Group's Chief Executive, Executive Directors and such other members of the executive management as it is designated to consider;

   --      review the on-going appropriateness and relevance of the remuneration policy; 

-- approve any performance related pay schemes and approve the total annual payments made under such schemes; and

-- review share incentive plans and for any such plans, determine each year whether awards will be made, and if so, the overall amount of such awards, the individual awards to Executive Directors and other senior executives and the performance targets to be used.

The Committee meets at least once a year.

Remuneration of Executive Directors

The Group's policy on the remuneration of Executive Directors is to provide a package of benefits, including salary, bonuses and share options, which reward success and each individual's contribution to the Group's overall performance in an appropriate manner. The remuneration packages of the Executive Directors comprise the following elements:

-- Basic salary - The Remuneration Committee sets basic salaries to reflect the responsibilities, skill, knowledge and experience of each Executive Director.

-- Bonus scheme - The Executive Directors are eligible to receive a bonus in addition to their basic salary conditional upon both the Group and the individual concerned achieving their performance targets. Performance targets are set for each individual Director to ensure that they are relevant to their role.

-- Pensions - Pension contributions to individuals' personal pension plans are payable by the Group at the rate of 5% of the individual Director's basic salary. During the year, two directors chose to take additional pension contributions in lieu of their bonuses.

-- Share options - The Group operates a share option plan and Save As You Earn ("SAYE") scheme for both Executive Directors and employees. Further details of the plan and outstanding options as at 31 December 2018 are given in notes 24 and 25 to the financial statements.

-- Other benefits - The Executive Directors are entitled to join the Group's Private Medical Insurance scheme.

-- Car Benefits - car benefits have been provided to assist the executive directors in the performance of their roles and are designed to be cost effective.

All the Executive Directors are engaged under service contracts which require a notice period of 12 months.

Remuneration of Non-Executive Directors

The remuneration of the Non-Executive Directors is determined by the Executive Directors.

Directors' remuneration

Details of individual Directors' emoluments for the year are as follows:

 
                  Salary   Bonuses   Benefits         Pension      2018      2017 
                      or 
                    fees                        contributions 
                     GBP       GBP        GBP             GBP       GBP       GBP 
 
 C G Hammond 
  (1)             20,000         -          -               -    20,000    40,000 
 W G Watt         25,000         -          -               -    25,000    20,000 
 M J Bending     149,243         -      5,609           7,462   162,314   233,217 
 N J Cullen      143,067         -      2,453           6,888   152,408   218,337 
 G R Dunlay      137,763         -      4,762           6,888   149,413   210,311 
 R A Chadwick 
  (2)                  -         -          -               -         -     4,500 
 S R Curtis       22,500         -          -               -    22,500    15,000 
                 497,573         -     12,824          21,238   531,635   741,365 
 

(1) Resigned as a Director on 29 June 2018

(2) Paid to Richard Chadwick, who was not an employee of Company and who resigned as a Director on 25 April 2017

Directors' interests in shares

The interests of the Directors in the shares of the Company at 31 December 2018, together with their interests at 31 December 2017, were as follows:

 
                                Number of ordinary 1p shares 
                             31 December           31 December 
                                    2018                  2017 
 
 Matthew Bending               2,102,200             2,102,200 
 Nancy Cullen                  1,333,000             1,333,000 
 George Watt                     120,000                25,000 
 Gregor Dunlay                    10,000                10,000 
 Charles Hammond 
  (1)                                  -                23,500 
 R A Chadwick                          -                     - 
  (2) 
 
 

(1) Charles Hammond resigned as a Director on 29 June 2018

(2) Richard Chadwick resigned as a Director on 25 April 2017

Directors' interests in share options

The interests of the Directors at 31 December 2018, in options over the ordinary shares of the Company were as follows:

 
                At 31   Granted   Exercised   Surrendered      Lapsed      At 31   Exercise       Date          Date     Expiry 
                                                                                                    of          from       date 
             December                                                   December      Price      Grant         which 
                 2017                                                       2018                         exercisable 
 
 
 Matthew 
  Bending     200,000         -           -             -   (100,000)    100,000      47.4p   12/01/15      12/01/18   12/01/25 
 
              120,000         -           -             -   (120,000)          -      61.0p   31/03/16      31/03/19   31/03/26 
 
               75,000         -           -             -           -     75,000      22.0p   28/03/17      28/03/20   28/03/27 
---------  ----------  --------  ----------  ------------  ----------  ---------  ---------  ---------  ------------  --------- 
 
 Nancy 
  Cullen      200,000         -           -             -   (100,000)    100,000      47.4p   12/01/15      12/01/18   12/01/25 
 
              120,000         -           -             -   (120,000)          -      61.0p   31/03/16      31/03/19   31/03/26 
 
               75,000         -           -             -           -     75,000      22.0p   28/03/17      28/03/20   28/03/27 
---------  ----------  --------  ----------  ------------  ----------  ---------  ---------  ---------  ------------  --------- 
 
 Gregor 
  Dunlay      200,000         -           -             -   (100,000)    100,000      47.4p   12/01/15      12/01/18   12/01/25 
 
              120,000         -           -             -   (120,000)          -      61.0p   31/03/16      31/03/19   31/03/26 
 
               75,000         -           -             -           -     75,000      22.0p   28/03/17      28/03/20   28/03/27 
---------  ----------  --------  ----------  ------------  ----------  ---------  ---------  ---------  ------------  --------- 
 
 Total      1,185,000         -           -             -   (660,000)    525,000 
 

All of these share options are subject to performance criteria.

Steve Curtis

Chairman of the Remuneration Committee

22 March 2019

Consolidated Statement of Comprehensive Income

For the 12 months ended 31 December 2018

 
                                Notes 
                                           12 months to      12 months to 
                                        31 December '18   31 December '17 
                                                GBP'000           GBP'000 
 
 Revenue                          4               7,939             9,995 
 
 Cost of Sales                    4             (2,886)           (3,389) 
 
 Gross Profit                                     5,053             6,606 
 
 Administration expenses                        (5,360)           (5,640) 
 Other operating income                             136               210 
 
 Operating (Loss) / Profit 
  before non-recurring costs                      (171)             1,176 
 
 Non-recurring costs              7               (244)                 - 
 
 Operating (Loss) / Profit                        (415)             1,176 
                                       ----------------  ---------------- 
 
 Finance income                                       7                12 
 Finance costs                    8                 (7)              (35) 
 
 (Loss) / Profit before 
  taxation                                        (415)             1,153 
                                       ----------------  ---------------- 
 
 Taxation                         9               (282)             (237) 
 
 
 (Loss) / Profit after 
  taxation                                        (697)             916 
                                         --------------  -------------- 
 
 Other Comprehensive income 
  Foreign exchange differences 
  on 
  translation of foreign 
  operations                                        (5)               3 
 
 Total comprehensive income 
  for the period                                  (702)             919 
                                         --------------  -------------- 
 
 
 (Loss) / Profit for the 
  year attributable to: 
 
 Owners of the Company                            (674)             930 
 Non-controlling interests                         (23)            (14) 
                                         --------------  -------------- 
                                                  (697)             916 
                                         --------------  -------------- 
 Total comprehensive income 
  for the 
 period attributable to: 
 
 Owners of the Company                            (679)             933 
 Non-controlling interests                         (23)            (14) 
                                         --------------  -------------- 
 Total comprehensive income 
  for the                                         (702)             919 
                                         --------------  -------------- 
 Period 
 
   (Loss) / Earnings per 
   share                             23 
 Basic - Before non-recurring 
  costs                                          (2.2)p            4.8p 
 Basic - After non-recurring 
  costs                                          (3.5)p            4.8p 
 Diluted - Before non-recurring 
  costs                                          (2.2)p            4.3p 
 Diluted - After non-recurring 
  costs                                          (3.5)p            4.3p 
 
 

Consolidated Statement of Financial Position

At 31 December 2018

 
                                Notes   31 December '18   31 December '17 
                                                GBP'000           GBP'000 
 Assets 
 Non-current assets: 
 Goodwill                        12               7,981             8,225 
 Other intangible assets         13                   4                15 
 Property, plant & equipment     14                 849             1,147 
                                       ----------------  ---------------- 
                                                  8,834             9,387 
 Current assets: 
 Trade & other receivables       16               3,553             3,367 
 Cash & cash equivalents         17                 843             2,661 
                                       ----------------  ---------------- 
                                                  4,396             6,028 
 
 Total assets                                    13,230            15,415 
                                       ----------------  ---------------- 
 
 Liabilities 
 Current liabilities: 
 Trade & other payables          18               3,677             5,120 
 Current tax payable             18                 197              (46) 
                                                  3,874             5,074 
 Non-current liabilities: 
 Deferred tax liabilities        15                 101                91 
                                                    101                91 
 
 Total liabilities                                3,975             5,165 
                                       ----------------  ---------------- 
 
 Net assets                                       9,255            10,250 
                                       ----------------  ---------------- 
 
 Equity 
 Share capital                   21                 195               195 
 Share premium                                    4,868             4,868 
 Special reserve                                    233               233 
 Retained earnings                                3,726             4,698 
 
 Equity attributable to 
  owners of the                                   9.022             9,994 
 Company 
 Non-controlling interest                           233               256 
                                       ----------------  ---------------- 
 Total equity                                     9,255            10,250 
                                       ----------------  ---------------- 
 

The financial statements were approved by the Board of Directors and authorised for issue on 22 March 2019.

Signed on behalf of the Board of Directors by:

M J Bending - Director

Consolidated Statement of Cash Flows

For the 12 months ended 31 December 2018

 
                                   Notes      12 months to      12 months to 
                                           31 December '18   31 December '17 
                                                   GBP'000           GBP'000 
 Cash flows from operating 
  activities 
 Cash generated from operations                    (1,389)             2,559 
 Interest received                                       7                12 
 Interest paid                       8                 (7)              (35) 
 Taxation                                             (29)             (136) 
 Net cash inflow from operating                    (1,418)             2,400 
 activities 
                                          ----------------  ---------------- 
 
 Cash flows from investing 
  activities 
 Purchase of intangible 
  assets                            13                   -              (12) 
 Purchase of property, 
  plant & equipment                 14               (107)             (111) 
 Net cash outflow from 
  investing                                          (107)             (123) 
 activities 
                                          ----------------  ---------------- 
 
 Cash flows from financing 
  activities 
 Bank facility repaid                                    -           (1,200) 
 Dividends paid                     11               (293)                 - 
                                          ----------------  ---------------- 
 Net cash (outflow) from                             (293)           (1,200) 
 financing activities 
                                          ----------------  ---------------- 
 
 (Decrease) / Increase 
  in cash and cash equivalents                     (1,818)             1,077 
 Cash and cash equivalents 
  at beginning of                                    2,661             1,584 
 period 
                                          ----------------  ---------------- 
 Cash and cash equivalents 
  at end of                         17                 843             2,661 
 period 
                                          ----------------  ---------------- 
 
 
 Reconciliation of operating 
  profit to net 
 cash flow from operating 
  activities 
 Operating (loss) / profit             (415)   1,176 
 Write off of goodwill          12       244       - 
 Amortisation of intangible 
  assets                        13        11      18 
 Depreciation of property, 
  plant &                       14       405     522 
 equipment 
 Effect of foreign exchange 
  rate moves                             (5)       6 
 (Increase) in receivables             (186)    (17) 
 (Decrease) / Increase 
  in payables                        (1,443)     854 
                                    --------  ------ 
 Cash flow from operating 
  activities                         (1,389)   2,559 
                                    --------  ------ 
 

Consolidated Statement of Changes in Equity

For the 12 months ended 31 December 2018

 
                          Share     Share   Special   Retained          Non-     Total 
                        capital   premium   reserve   Earnings   controlling    equity 
                        GBP'000   GBP'000   GBP'000    GBP'000      interest   GBP'000 
                                                                     GBP'000 
 
 At 31 December 
  2016                      195     4,868       233      3,762           270     9,328 
 
 Comprehensive 
 income: 
 Foreign currency 
 Translation                  -         -         -          3             -         3 
 Profit for the 
  period                      -         -         -        933          (14)       919 
                       --------  --------  --------  ---------  ------------  -------- 
 Total comprehensive          -         -         -        936          (14)       922 
 Income 
 
 Transactions 
  with 
 owners: 
 Dividends paid               -         -         -          -             -         - 
                       --------  --------  --------  ---------  ------------  -------- 
 Total transactions           -         -         -          -             -         - 
  with 
 Owners 
 
 At 31 December 
  2017                      195     4,868       233      4,698           256    10,250 
 
 
 Comprehensive 
 income: 
 Foreign currency 
 Translation              -       -     -     (5)      -     (5) 
 (Loss) for the 
  period                  -       -     -   (674)   (23)   (697) 
                       ----  ------  ----  ------  -----  ------ 
 Total comprehensive      -       -     -   (679)   (23)   (702) 
 Income 
 
 Transactions 
  with 
 owners: 
 Dividends paid           -       -     -   (293)      -   (293) 
                       ----  ------  ----  ------  -----  ------ 
 Total transactions 
  with                    -       -     -   (293)      -   (293) 
 Owners 
 
 At 31 December 
  2018                  195   4,868   233   3,726    233   9,255 
                       ----  ------  ----  ------  -----  ------ 
 

Notes to the Financial Statements

For the 12 months ended 31 December 2018

   1.         General information 

SpaceandPeople plc is a public limited company incorporated and domiciled in Scotland (registered number SC212277) which is listed on AIM (dealing code SAL).

   2.         Basis of preparation 

The Group's financial statements for the period ended 31 December 2018 and for the comparative period ended 31 December 2017 have been prepared on a going concern basis under the historical cost convention in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and International Financial Reporting Interpretations Committee (IFRIC) interpretations, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The Directors have, at the time of approving the financial statements, a reasonable expectation that SpaceandPeople has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Future accounting developments

New and revised IFRSs applied with no material effect on the consolidated financial statements

 
 Title                  Implementation             Effect on Group 
 IFRS 15 - Revenue      Annual periods beginning   None 
  from contracts with    on or after 1 January 
  Customers              2018 
 IFRS 9 - Financial     Annual periods beginning   No material impact 
  Instruments            on or after 1 January 
                         2018 
 

The following standard will be introduced in future periods

 
 Title                Implementation             Effect on Group 
 IFRS 16 - "Leases"   Annual periods beginning   Management believe 
                       on or after 1 January      that the Group will 
                       2019                       need to recognise 
                                                  a right of use asset 
                                                  and a lease liability 
                                                  for the office buildings 
                                                  and motor vehicles 
                                                  currently treated 
                                                  as operating leases. 
                                                  At 31 December 2018 
                                                  the future minimum 
                                                  lease payments amounted 
                                                  to GBP383k. The new 
                                                  standard will mean 
                                                  that the nature of 
                                                  the expense of the 
                                                  above cost will change 
                                                  from being an operating 
                                                  lease expense to depreciation 
                                                  and interest expense. 
 

Management anticipates that the standards and interpretations in issue, but not yet effective will be adopted in the financial statements when they become effective and foresee currently no material impact by the adoptions on the financial statements of the Group in the period of initial application. However, this will be assessed further upon implementation.

   3.          Accounting policies 

Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss of goodwill is recognised directly in the consolidated statement of comprehensive income. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

The Group's policy for goodwill arising on the acquisition of an associate is described below.

Investments in subsidiaries

The parent Company's investments in subsidiary undertakings are included in the Company statement of financial position at cost, less provision for any impairment in value.

Revenue

Revenue is measured at the fair value of consideration received or receivable. Revenue is shown net of value-added tax, rebates and discounts and after eliminating intergroup sales. Revenue is recognised when the amount of revenue can be measured reliably, it is probable that future economic benefits will flow to the Group and when any specific delivery criteria have been met.

Commission

Revenue from commission receivable while acting as agent is recognised when the following conditions are satisfied;

   -       Contract is agreed with promoter / merchant 
   -       Venue acceptance of contract 
   -       Invoice issued and no further input anticipated 

Acting as principal

Revenue from agreements where we act as principal i.e. renting space from venues and reselling to promoters and operators, is recognised as gross revenue receivable by us, with the corresponding amount payable to the venue owner being recognised in cost of sales.

Leasing Income

Revenue from leasing activities is recognised on a straight-line basis over the term of the lease.

Licence Fees

Licence fee revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement.

Interest income

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the asset's net carrying amount on initial recognition.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Property, plant & equipment

Depreciation is provided at the annual rates below in order to write off each asset over its estimated useful life.

 
 Plant & equipment     -    12.5% of cost 
 Fixtures & fittings   -    25% of cost 
 Computer equipment    -    25% of cost 
  Computer software     -    33% of cost 
 

Property, plant & equipment is stated at cost less accumulated depreciation to date.

Intangible assets

Website development costs

The Group capitalises all costs directly attributable to further developing its websites, while costs which relate to on-going maintenance are expensed as they arise. The capitalised costs are depreciated over three years.

Patents and trademarks

The costs of obtaining patents and trademarks are capitalised and written off over the economic life of the asset acquired.

Impairment of non-current assets

The need for any non-current asset impairment is assessed by comparison of the carrying value of the asset against the higher of realisable value and the value in use or, in the case of intangible assets, the anticipated future cash flows arising from the asset.

Leasing commitments

Rentals paid under operating leases are charged against profit as incurred. The Group has no finance leases.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis over the term of the relevant lease.

Taxation

The tax expense represents the sum of tax currently payable and deferred tax. Tax currently payable is based on the taxable profit for the period. The Group's liability for current tax is calculated using rates that have been enacted or substantially enacted at the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in computation of taxable profits and is accounted for using the liability method. Deferred tax liabilities are recognised for all temporary timing differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition, other than in a business combination, of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax laws and rates that have been enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

Foreign exchange

Items included in the Group's financial statements are measured using Pounds Sterling, which is the currency of the primary economic environment in which the Group operates and is also the Group's presentational currency.

Transactions denominated in foreign currencies are translated into Sterling at the rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rates at that date. These translation differences are dealt with in the profit and loss account.

The income and expenditure of overseas operations are translated at the average rates of exchange during the period. Monetary items on the balance sheet are translated into Sterling at the rate of exchange ruling on the balance sheet date and fixed assets at historical rates. Exchange difference arising are treated as a movement in reserves.

Financial instruments

Financial assets and liabilities are recognised in the Group's balance sheet when it becomes a party to the contractual provisions of the instrument.

Trade and other receivables

Trade and other receivables are carried at original invoice value less an allowance for any uncollectable amounts. An allowance for bad debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off in the income statement when identified.

Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost and comprise cash in hand, cash at bank and deposits with banks.

Trade and other payables

Trade and other payables are carried at amortised costs and represent liabilities for goods or services provided to the Group prior to the period end that are unpaid and arise when the Group becomes obliged to make future payments in respect of these goods and services.

Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Share based payments

The Group operates a number of equity settled share-based payment schemes under which share options are issued to certain employees. The fair value determined at the grant date of the equity settled share-based payment, where material, is expensed on a straight-line basis over the vesting period. For schemes with only market-based performance conditions, those conditions are taken into account in arriving at the fair value at grant date.

Pensions

The Group pays contributions to the personal pension schemes of certain employees. Contributions are charged to the income statement in the period in which they fall due.

Critical accounting judgements and estimates

The preparation of financial statements in conformity with IFRS requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenditure during the period. Although these estimates are based on management's best knowledge of current events and actions, actual results may differ from those estimates. IFRS also requires management to exercise its judgement in the process of applying the Group's accounting policies.

The areas where significant judgements and estimates have been made in the preparation of these financial statements are the useful lives and impairment of non-current and intangible assets, impairment of the value of investment in associates and taxation. Explanations of the methodology and the resultant assumptions are detailed in the relevant accounting policies above and the respective notes to the financial statements.

Borrowing costs

Borrowing costs are amortised over the duration of the loan and recognised throughout the term of the loan.

   4.          Segmental reporting 

The Group maintains its head office in Glasgow and a subsidiary office in Hamburg, Germany. These are reported separately. In addition, the retail business, now trading as POP retail, has an office in London and a subsidiary in Germany. The Group has determined that these are the principal operating segments as the performance of these segments is monitored separately and reviewed by the Board.

The following tables present revenues, results and asset and liability information regarding the Group's two core business segments - Promotional Sales and Retail, split by geographic area, after licence fees and management charges made between Group companies. The Other segment incorporates SpaceandPeople India.

 
 
   Segment revenues         Promotion     Promotion     Retail     Retail      Head     Other     Group 
   and 
 results                           UK       Germany         UK    Germany    Office 
 for 12 months                GBP'000       GBP'000    GBP'000    GBP'000   GBP'000   GBP'000   GBP'000 
  to 
 31 December '18 
 
 Continuing operations          3,238           369      3,062      1,236         -        34     7,939 
 Revenue 
 
 Cost of sales                      -             -    (2,252)      (634)         -         -   (2,886) 
 Administrative 
  expenses                    (2,609)         (582)      (316)      (934)     (830)      (89)   (5,360) 
 Other revenue                      -            60          -         76         -         -       136 
 Non-recurring 
  costs                         (244)             -          -          -         -         -     (244) 
 
 Segment operating 
  profit / (loss)                 385         (153)        494      (256)     (830)      (55)     (415) 
 
 
 Finance income                     -             -          -          -         -         7         7 
 Finance costs                    (7)             -          -          -         -         -       (7) 
 
 Segment profit 
  / (loss)                        378         (153)        494      (256)     (830)      (48)     (415) 
 before taxation 
                         ------------  ------------  ---------  ---------  --------  --------  -------- 
 
 
 Segment assets       Promotion   Promotion    Retail    Retail     Other     Group 
  and 
 liabilities                 UK     Germany        UK   Germany 
 as at 31 December      GBP'000     GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
  '18 
 
 Total segment 
  assets                  6,819         469     4,676       599       667    13,230 
 
 Total segment 
  liabilities           (2,064)       (495)   (1,051)     (316)      (49)   (3,975) 
 
 Total net assets         4,755        (26)     3,625       283       618     9,255 
                     ----------  ----------  --------  --------  --------  -------- 
 
 
 Segment revenues     Promotion   Promotion    Retail    Retail      Head     Other     Group 
  and 
 results                     UK     Germany        UK   Germany    Office 
 for 12 months          GBP'000     GBP'000   GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
  to 
 31 December 
  '17 
 
 Continuing 
  operations              3,695         807     3,438     1,993         -        62     9,995 
 revenue 
 
 Cost of sales                -           -   (2,648)     (741)         -         -   (3,389) 
 Administrative 
  expenses              (1,710)       (895)     (389)   (1,230)   (1,307)     (109)   (5,640) 
 Other revenue                -          69         -       141         -         -       210 
 
 Segment operating 
  profit / (loss)         1,985        (19)       401       163   (1,307)      (47)     1,176 
 
 
 Finance income               -           -         -         -         -        12        12 
 Finance costs             (35)           -         -         -         -         -      (35) 
                     ----------  ----------  --------  --------  --------  --------  -------- 
 
 Segment profit 
  / (loss) before 
  taxation                1,950        (19)       401       163   (1,307)      (35)     1,153 
                     ----------  ----------  --------  --------  --------  --------  -------- 
 
 
 Segment assets       Promotion   Promotion    Retail    Retail     Other     Group 
  and 
 liabilities                 UK     Germany        UK   Germany 
 as at 31 December      GBP'000     GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
  '17 
 
 Total segment 
  assets                  7,486         725     5,386     1,077       741    15,415 
 
 Total segment 
  liabilities           (2,882)       (493)   (1,336)     (383)      (71)   (5,165) 
 
 Total net assets         4,604         232     4,050       694       670    10,250 
                     ----------  ----------  --------  --------  --------  -------- 
 
    5.        Operating (loss) / profit 

The operating (loss) / profit is stated after charging:

 
                                        12 months      12 months 
                                               to             to 
                                     December '18   December '17 
                                          GBP'000        GBP'000 
 
 Motor vehicle leasing                         56             78 
 Property leases                              240            347 
 Amortisation of intangible 
  assets                                       11             18 
 Depreciation of property, 
  plant and equipment                         405            532 
                                    -------------  ------------- 
                                              712            975 
                                    -------------  ------------- 
 Auditor's remuneration: 
 Fees payable for: 
 Audit of Company                              25             22 
 Audit of subsidiary undertakings              19             19 
 Tax services                                   4              8 
 Other services                                25              1 
                                    -------------  ------------- 
                                               73             50 
                                    -------------  ------------- 
 
 Directors' remuneration                      532            741 
                                    -------------  ------------- 
 
   6.         Staff costs 

The average number of employees in the Group during the period was as follows:

 
                                12 months      12 months 
                                       to             to 
                             December '18   December '17 
 
 Executive Directors                    3              3 
  Non-executive Directors               3              3 
 Administration                        27             32 
 Telesales                             40             42 
 Commercial                            12             10 
 Maintenance                            7              9 
                            -------------  ------------- 
                                       92             99 
                            -------------  ------------- 
 
 
                             12 months      12 months 
                                    to             to 
                          December '18   December '17 
                               GBP'000        GBP'000 
 
 Wages and salaries              3,212          3,782 
 Social Security costs             440            425 
 Pensions                          208            189 
                         -------------  ------------- 
                                 3,860          4,396 
                         -------------  ------------- 
 

Details of Directors' emoluments, including details of share option schemes, are given in the remuneration report. These disclosures form part of the audited financial statements of the Group.

   7.         Non-recurring costs 

During the period, the Group took the decision to write off GBP244k, being the carrying value of the goodwill relating to SpaceandPeople India Pvt Ltd as the level of profitability in that company no longer supported the valuation. (2017: nil).

   8.         Finance income and costs 
 
                           12 months   12 months to 
                                  to 
                        December '18   December '17 
                             GBP'000        GBP'000 
 Finance income: 
 Interest receivable               7             12 
 
 Finance costs: 
 Interest payable                (7)           (35) 
 
   9.         Taxation 
 
                                            12 months      12 months 
                                                   to             to 
                                             December   December '17 
                                                  '18 
                                              GBP'000        GBP'000 
 
 Current tax expense: 
 Current tax on profits for the year               84            243 
 Adjustment for under / (over) provision 
  in prior periods                                 13            (1) 
                                           ----------  ------------- 
 Total current tax                                 97            242 
 Foreign tax: 
 Current tax on foreign income for 
  the period                                        -             52 
 Adjustment for under / (over) provision 
  in prior periods                                175           (57) 
                                           ----------  ------------- 
 Total foreign tax                                175            (5) 
 
 Deferred tax: 
 Charge in respect of temporary timing             10              - 
  differences 
                                           ----------  ------------- 
 Total deferred tax                                10              - 
 
 
   Income tax expense as reported in 
   the Income Statement                           282            237 
                                           ----------  ------------- 
 

The tax assessed for the period is lower than the standard rate of corporation tax in the UK. The differences are explained below:

 
                                                                                       12 months      12 months 
                                                                                              to             to 
                                                                                        December   December '17 
                                                                                             '18 
                                                                                         GBP'000        GBP'000 
 
 (Loss) / profit on ordinary activities 
  before tax                                                                               (415)          1,153 
                                                                                      ----------  ------------- 
 Profit on ordinary activities at 
  the standard rate of corporation 
  tax in 
 the UK of 19% (2016: 20%) 
                                                                 Jan - Mar 2017: 20%           -             57 
                                                                 Apr - Dec 2017: 19%           -            165 
                                                                 Jan - Dec 2018: 19%        (79)              - 
 
 Tax effect of: 
 
   *    Prior period adjustment                                                              188           (57) 
                                                                                               -             18 
  *    Difference due to foreign taxation rates                                                -              4 
                                                                                             173             50 
 
   *    Tax losses 
 
 
   *    Disallowable items 
 
 Income tax expense as reported in 
  the Income Statement                                                                       282            237 
                                                                                      ----------  ------------- 
 
   10.       Profit for the period 

The Company has taken advantage of the exemption allowed under Section 408 of the Companies Act 2006 and has not presented its own Income Statement in these financial statements. The Group profit for the period includes a Company loss after tax and before dividends of GBP478k after the incorporation of all UK head office costs (2017 profit: GBP570k) which is dealt with in the financial statements of the parent Company.

   11.       Dividends 
 
                               12 months to   12 months to 
                               December '18   December '17 
                                    GBP'000        GBP'000 
 
 Paid during the period                 293              - 
 Recommended final dividend              98            293 
 

Equity - A final dividend of 0.50p per ordinary share is recommended for 2018 (2017: 1.50p).

   12.       Goodwill 
 
 Cost                   GBP'000 
 
 At 31 December 2016      8,225 
 Additions                    - 
                       -------- 
 At 31 December 2017      8,225 
 Additions                    - 
                       -------- 
 At 31 December 2018      8,225 
                       -------- 
 
 
 Accumulated impairment losses 
 At 31 December 2016                - 
 Charge for the period              - 
                                 ---- 
 At 31 December 2017                - 
 Charge for the period            244 
 At 31 December 2018              244 
                                 ---- 
 
 
 Net book value 
 At 31 December 2016    8,225 
                       ------ 
 At 31 December 2017    8,225 
                       ------ 
 At 31 December 2018    7,981 
                       ------ 
 

Goodwill acquired in a business combination is allocated at acquisition to the cash-generating units (CGUs) that are expected to benefit from that business combination. The Directors consider that the businesses of the UK Retail sub group and SpaceandPeople India Pvt Limited are identifiable CGUs and the carrying amount of Goodwill is allocated against these CGUs. During 2018 it was decided that the value of the goodwill in SpaceandPeople India Pvt Limited of GBP244,000 should be impaired in full. Goodwill for the UK Retail sub group remains unchanged at GBP7,981,000.

The recoverable amount of the cash generating unit was determined based on value-in-use calculations, covering a detailed forecast, followed by an extrapolation of expected cash flows based on the targeted and expected growth rate over the next five years followed by a terminal factor determined by management.

The present value of the future cash flows is then calculated using a discount rate of 6.6%. This discount rates include appropriate adjustments to reflect, in the directors judgement, the market risk and specific risk of the GGU.

The growth rate utilised in calculation of the terminal factor is based on expected inflationary growth in the UK beyond the period of forecasting. The growth rate used was 1.5%.

Cash flow projections during the budget period are based on an average growth in EBITDA which the Directors consider to be conservative given the plans for the businesses and the potential increased returns particularly in relation to the pipeline of new business opportunities. The discount rates reflect appropriate adjustments relating to market risk and specific risk factors of each CGU.

The estimate of recoverable amount for the CGU is sensitive to the discount rate, the cash flow projections and the growth rate.

If the discount rate used is increased beyond 8.4%, for each further movement of 1% an impairment loss of GBP1.2 million would have to be recognised and written off against goodwill.

If the cash flow projection used is decreased beyond 30%, for each further movement of 1% an impairment loss of GBP0.1 million would have to be recognised and written off against goodwill.

13. Other intangible assets

 
 Cost                  Website       Product      Patents     Total 
                                                        & 
                   development   development   trademarks 
                       GBP'000       GBP'000      GBP'000   GBP'000 
 
 At 31 December 
  2016                     284           137          103       524 
 Additions                   -             -           12        12 
 At 31 December 
  2017                     284           137          115       536 
 Additions                   -             -            -         - 
                  ------------  ------------  -----------  -------- 
 At 31 December 
  2018                     284           137          115       536 
                  ------------  ------------  -----------  -------- 
 
 
 Amortisation          Website       Product      Patents     Total 
                                                        & 
                   Development   development   Trademarks 
                       GBP'000       GBP'000      GBP'000   GBP'000 
 
 At 31 December 
  2016                     284           137           82       503 
 Charge for the 
  period                     -             -           18        18 
 At 31 December 
  2017                     284           137          100       521 
 Charge for the 
  period                     -             -           11        11 
                  ------------  ------------  -----------  -------- 
 At 31 December 
  2018                     284           137          111       532 
                  ------------  ------------  -----------  -------- 
 
 
 Net book value         Website        Product      Patents     Total 
                                                          & 
                    development    Development   Trademarks 
                        GBP'000        GBP'000      GBP'000   GBP'000 
 
 At 31 December 
  2016                        -              -           21        21 
                  -------------  -------------  -----------  -------- 
 At 31 December 
  2017                        -              -           15        15 
                  -------------  -------------  -----------  -------- 
 At 31 December 
  2018                        -              -            4         4 
                  -------------  -------------  -----------  -------- 
 
   14.       Property, plant and equipment 

The Group movement in property, plant & equipment assets was:

 
 Cost                     Plant &    Fixture    Computer     Total 
                                           & 
                        equipment   fittings   equipment 
                          GBP'000    GBP'000     GBP'000   GBP'000 
 
 At 31 December 2016        3,040        274         574     3,888 
 Additions                      8          3         100       111 
 At 31 December 2017        3,048        277         674     3,999 
 Additions                      6          9          92       107 
                       ----------  ---------  ----------  -------- 
 At 31 December 2018        3,054        286         766     4,106 
                       ----------  ---------  ----------  -------- 
 
 
 Depreciation               Plant &    Fixture    Computer     Total 
                                             & 
                          Equipment   Fittings   Equipment 
                            GBP'000    GBP'000     GBP'000   GBP'000 
 
 At 31 December 2016          1,643        249         438     2,330 
 Charge for the period          418          4         100       522 
 At 31 December 2017          2,061        253         538     2,852 
 Charge for the period          292         10         103       405 
                         ----------  ---------  ----------  -------- 
 At 31 December 2018          2,353        263         641     3,257 
                         ----------  ---------  ----------  -------- 
 
 
 Net book value           Plant &    Fixture    Computer     Total 
                                           & 
                        equipment   Fittings   Equipment 
                          GBP'000    GBP'000     GBP'000   GBP'000 
 
 At 31 December 2016        1,397         25         136     1,558 
                       ----------  ---------  ----------  -------- 
 At 31 December 2017          987         24         136     1,147 
                       ----------  ---------  ----------  -------- 
 At 31 December 2018          701         23         125       849 
                       ----------  ---------  ----------  -------- 
 
   15.       Deferred tax 
 
                                                            31 December              31 December 
                                                                    '18                      '17 
                                                                GBP'000                  GBP'000 
 
            Deferred tax liability: 
             Deferred tax liability to 
             be recognised after more 
             than 12 months 
                                                                    101                       91 
             Deferred tax assets: 
             Deferred tax asset to be 
             recognised after less than 
             12 months                                                -                        - 
            Deferred tax liability (net)                            101                       91 
                                                =======================  ======================= 
 
 
 
            At 1 January 2018 
             Debit / (Credit) in respect 
             of losses 
             Charge in respect of temporary                          91                       90 
             timing differences on property,                          -                        - 
             plant and equipment                                     10                        1 
            At 31 December 2018                                     101                       91 
                                                =======================  ======================= 
 

16. Trade and other receivables

 
                   31 December   31 December 
                           '18           '17 
                       GBP'000       GBP'000 
 
 Trade debtors           2,700         2,626 
 Other debtors             476           458 
 Prepayments               377           283 
 Total                   3,553         3,367 
                  ============  ============ 
 
 
 Amounts falling due 
  after more than one 
  year included above 
  are:                    412   424 
 

The maximum exposure to credit risk at the balance sheet date is the carrying amount of receivables detailed above. The Group does not hold any collateral as security.

The Directors do not believe that there is a significant concentration of credit risk within the trade receivables balance. As of 31 December 2018, trade receivables of GBP881k (2017: GBP784k) were past due but not impaired.

The ageing of trade debtors:

 
                    Current    0 - 30   31 - 60   61 Days     Total 
                                 Days      Days         + 
                    GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
 
 31 December '18      1,754       359       177       410     2,700 
 
 31 December '17      1,842       277       244       263     2,626 
 
   17.       Cash and cash equivalents 
 
                      31 December   31 December 
                              '18           '17 
                          GBP'000       GBP'000 
 
 Cash at bank and 
  on hand                     843         2,661 
                              843         2,661 
                     ============  ============ 
 
   18.       Trade and other payables 
 
                              31 December   31 December 
                                      '18           '17 
                                  GBP'000       GBP'000 
 
 Trade creditors                      442           568 
 Other creditors                    1,285         1,767 
 Social Security and 
  other taxes                         240           489 
 Accrued expenses                   1,343         2,003 
 Deferred income                      367           293 
 Trade and other payables           3,677         5,120 
 
 Corporation tax                      197          (46) 
                             ------------  ------------ 
 Total                              3,874         5,074 
                             ============  ============ 
 

All trade and other payables are short term. The carrying values of trade and other payables are considered to be a reasonable approximation of fair value.

   19.       Financial instruments and risk management 

The Group has no material financial instruments other than cash, current receivables and liabilities, in both this and the prior period, all of which arise directly from its operations. The net fair value of its financial assets and liabilities is the same as their carrying value as detailed in the balance sheet and related notes.

Credit risk - The Group's credit risk relates to its receivables and is managed by undertaking regular credit evaluations of its customers.

Liquidity risk - The Group operates a cash-generative business and holds net funds. The Directors consider the funding structure to be adequate for the Group's current funding requirements and this is expected to strengthen further during 2019.

Borrowing facilities - The Group has agreed facilities of GBP1.25 million, of which GBPnil was utilised at the year end.

These facilities are secured by a floating charge.

Financial assets - These comprise cash at bank and in hand. All bank deposits are floating rate.

Financial liabilities - These include short-term creditors and a revolving credit facility of GBP1million, of which GBPnil was utilised at the year end. All financial liabilities will be financed from existing cash reserves and operating cash flows.

Foreign currency risk - The Group is exposed to foreign exchange risk primarily from Euros due to its German operations and Euro denominated licensing income as detailed in note 4 Segmental Reporting. The Group monitors its foreign currency exposure and manages the position where appropriate. In addition, the Group has investments in a subsidiary in India.

   20.       Operating lease commitments 

At the period end date, SpaceandPeople plc had outstanding commitments for future lease payments which fall due as follows:

 
                           31 December   31 December 
                                   '18           '17 
                               GBP'000       GBP'000 
 
 Within 1 year                     256           357 
 Between 2 and 5 years 
  inclusive                        127           358 
 
   21.       Called up share capital 
 
 Allotted, issued and fully paid        31 December   31 December 
                                                '18           '17 
 Class           Nominal 
                  value 
 Ordinary        1p          GBP            195,196       195,196 
                             Number      19,519,563    19,519,563 
 
   22.      Related party transactions 

Compensation of key management personnel

Key management personnel of the Group are defined as those persons having authority and responsibility for the planning, directing and controlling the activities of the Group, directly or indirectly. Key management of the Group are therefore considered to be the directors of SpaceandPeople plc. There were no transactions with the key management, other than their emoluments, which are set out in the remuneration report.

   23.       Earnings per share 
 
                                   12 months to      12 months to 
                                31 December '18   31 December '17 
                                Pence per share   Pence per share 
 
 Basic (loss) / earnings per 
  share 
 
 Before non-recurring costs              (2.2)p              4.8p 
 
 After non-recurring costs               (3.5)p              4.8p 
 
 Diluted (loss) / earnings 
  per share 
                                         (2.2)p 
 Before non-recurring costs                                  4.3p 
                                         (3.5)p 
 After non-recurring costs                                   4.3p 
 

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

Basic earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

 
                                             12 months to      12 months to 
                                          31 December '18   31 December '17 
                                                  GBP'000           GBP'000 
 
 (Loss) / profit after tax 
  for the period attributable 
  to owners of the Company                          (679)               933 
 
   Non-recurring items 
 
   (Loss) / profit after tax 
   for the period before non-recurring                244                 - 
   costs attributable to owners 
   of the company                                   (435)               933 
                                             12 months to      12 months to 
                                          31 December '18   31 December '17 
                                                     '000              '000 
 
 Weighted average number of 
  ordinary shares                                  19,520            19,520 
 for the purposes of basic 
  earnings per share 
 

Diluted earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:

 
                                             12 months to      12 months to 
                                          31 December '18   31 December '17 
                                                  GBP'000           GBP'000 
 
 (Loss) / profit after tax 
  for the period attributable 
  to owners of the Company                          (679)               933 
 
   Non-recurring items 
 
   (Loss) / profit after tax 
   for the period before non-recurring                244                 - 
   costs attributable to owners 
   of the company                                   (435)               933 
                                             12 months to      12 months to 
                                          31 December '18   31 December '17 
                                                     '000              '000 
 
 Weighted average number of 
  ordinary shares                                  21,548            21,840 
 for the purposes of diluted 
  earnings per share 
 

The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows.

 
                                  12 months to      12 months to 
                               31 December '18   31 December '17 
                                          '000               '00 
 
 Weighted average number of 
  shares in issue                       19,520            19,520 
 during the period 
 
 Weighted average number of 
  ordinary shares                        2,028             2,320 
 used in the calculation of 
  basic earnings per 
 share deemed to be issued 
  for no 
 consideration in respect 
  of employee options 
 
 Weighted average number of 
  ordinary shares                       21,548            21,840 
  used in the calculation 
   of diluted earnings per 
 share 
 

As set out in notes 24 and 25, there are share options and a SAYE scheme outstanding as at 31 December 2018 which, if exercised, would increase the number of shares in issue. However, the diluted loss per share is the same as the basic loss per share, as the loss for the year has an anti-dilutive effect.

   24.       Share options 

The Group has established a share option scheme that senior executives and certain eligible employees are entitled to participate in at the discretion of the Board which is advised on such matters by the Remuneration Committee.

In aggregate, share options have been granted under the share option scheme over 769,325 ordinary shares exercisable within the dates and at the exercise prices shown below, being the market value at the date of the grant.

 
 Date of grant     Number     Option period                  Price 
 
 12 January 2015   419,325    12 January 2018 - 12 January   47.4p 
                               2025 
  27 March 2017     350,000    29 March 2020 - 27 March       22.0p 
                                2027 
 

The movement in the number of options outstanding under the scheme over the period is as follows:

 
                                          12 months     12 months 
                                                 to            to 
                                        31 December   31 December 
                                                '18           '17 
 
 
 Number of options outstanding as at 
  the beginning of the period             1,885,522     1,557,235 
 
 Granted                                          -       400,000 
 Lapsed                                 (1,016,197)             - 
  Forfeited                               (100,000)      (71,713) 
                                       ------------  ------------ 
 Number of options outstanding as at 
  the end of the period                     769,325     1,885,522 
 

In total, 769,325 options were outstanding at 31 December 2018 (1,885,522 at 31 December 2017) with a weighted average exercise price of 35.8p (46.7p at 31 December 2017).

The total share-based payment charge for the year, calculated in accordance with IFRS2 on share-based payments, was GBPnil (2017: GBP8,400).

   25.       Save As You Earn Scheme 

The Group has a Save As You Earn ("SAYE") scheme that all UK based employees are entitled to participate in. The scheme runs for three years from 1 July 2017 with the opportunity to buy shares at a price of 19.5p, a 20% discount on the average closing share price on the three working days from 20 to 24 April 2017.

Share options have been granted under the SAYE scheme over 376,604 ordinary shares exercisable within the dates and at the exercise prices shown below, being the market value at the date of the grant.

 
 Date of grant    Number    Option period               Price 
                            1 July 2020 - 31 December 
 18 May 2017      376,604    2020                       19.5p 
 

The movement in the number of options outstanding under the scheme over the period is as follows:

 
                                          12 months     12 months 
                                                 to            to 
                                        31 December   31 December 
                                                '18           '17 
 
 
 Number of options outstanding as at 
  the beginning of the period               675,200       147,284 
 
 Granted                                          - 
  Lapsed                                   (21,677)       688,783 
 Forfeited                                (276,919)     (160,867) 
                                       ------------  ------------ 
 Number of options outstanding as at 
  the end of the period                     376,604       675,200 
 

In total, 376,604 options were outstanding at 31 December 2018 (675,200 at 31 December 2017) with an average exercise price of 19.5p (20.5p at 31 December 2017).

The total share-based payment charge for the year, calculated in accordance with IFRS2 on share-based payments, was GBPnil (2017: GBP42,016).

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR MMGZFKZLGLZM

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March 25, 2019 03:00 ET (07:00 GMT)

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