SpaceandPeople plc (SAL.L) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the SpaceandPeople plc Interim Results Investor Presentation. [Operator Instructions] Before we begin, as usual, we would just like to submit the following poll. And if you could give that your kind attention. I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from SpaceandPeople plc, Nancy. Good afternoon.

Good afternoon, and welcome to our results presentation. As has been described, we're just going to be talking about our interim financial statements in this presentation. And the first slide is just a picture of one of our activations, which was a promotion for Rubicon drink and was a climbing wall outside Kings Cross station and they also sampled 100,000 drinks during that time. Anybody who doesn't know us, we are the SpaceandPeople group. We match brands, retailers and promoters with their target audience across the U.K. and Europe, set up by myself and a person called Matthew Bending in 2000. Listed in 2004, we are market leaders in the sale of a new space across the U.K. and Germany. In 2023, we billed GBP 15 million across our business. We've got now 66 members was 59 at the beginning of the year. Our starter based in London, Glasgow and Hamburg, and as we will talk about later in the presentation were the exclusive agency representing network rail across all its activity on concourse base. We're also at the forefront of developing new products for our operators, such as Rock Up and Pop Up, and we'll talk a bit about that later or in the presentation. And during the period that I'm going to talk about the first 6 months of the year, we also set up a data-driven sales tool called CORE, which is an insights database, which will drive new business onto our service. And if I can hand over to Gregor to talk about the results.

Good afternoon, everyone. Just looking at a few graphs showing the performance compared to the past first half years, you'll see that our gross profitability has been improving and improved quite significantly this year compared to the first half of that 2023. That turn led to a very significant decrease in our operating loss, as you have been able to see from the interim results and down to roughly GBP 150,000. For the first half, import is traditionally or much quieter half of the year compared to when we do our peak trading in the second half. That has resulted in the EPS for the group being significantly better than it has been in the past as well, all on the trajectory, and we feel that it's a strong performance in the first half year compared to what we would expecting. It also shows that our net cash position has improved in a linear fashion for the last couple of years as we continue to repay our debt and generate more cash from trading at the position at each June for '22, '23, '24, getting better, and we continue to repay our debt as expected even since then. If people are checking back to previous year's results, and wondering why revenue figures have been restated. We changed our revenue recognition policy at the end of 2023 for the U.K. kiosk division. And we started to show that as net revenue rather than gross for the cost of sales in the past. So I can see that one of the questions already asked was about the comparative numbers is just because they were rebased in order to match. No difference in terms of how that drops down to our gross profit or our earnings for the year.

So if we can talk about our operational highlights, obviously, all divisions performed well in H1. Our Brand Experience business was up 98% year-on-year. We continue to roll out our full service retail product and then a picture of that on the left-hand side, which is our result based in Westfield. And we had good kiosk expansion in Germany. A lot of people are asking us this. We were delighted to sign a new 5 -- we will be filing, but it's agreed a new 5-year contract with Network Rail, which gives us until September 2029. And along with that, we also won the Southeast Trains contract for the same period. We also, at the same time, renewed our major contract in Germany, which is the base of all our German business until 2029 as well. And we grew the number of retail units that we put into those centers. One thing that we have done this year as well, we used to run the promotions business in Germany and we stopped doing that in 2017. We have actually employed someone to start exploring the promotions business, again, that is booking brand business into Germany and into Europe generally. So that is a new part of the business for the German team. If we look at U.K. performance, that was very strong, up 40%, as I said before, driven by a 96% increase in brand experience, booking brands such as Tesla, Channel, some sense to big U.K. brands going into centers. The first quarter was quite-quiet, but actually the second quarter really made up for that. It was incredibly strong, an awful lot of brands booking outdoors over the summer months. Similarly, we've doubled our kiosk revenue number of Rock Up and Pop Up units in the first 6 months of the year, and we're looking to continue with that particularly in some of the major London venues such as Westfield, Trafford and Bluewater. And aligned with that was obviously a bit of an increase in admin expenses and we [indiscernible] to report the growth in sales. And of course, we had additional commission costs because we were selling so much space.

In Germany, as Nancy mentioned, delighted to renew the BCE contract for another 5 years. That's the bedrock of business there, and it gives us greater access going forward to all of their malls. So we're currently trading 20 more units. We've traded in H1 '20, more units on average than we had the previous year and up 24% revenue. We have been focused on expanding relationships like with ECE. So we've had great positive discussions [ CPA ], URW and Hood and others, and that has given us access to more European growth. So selling their mall in Germany, but also selling their malls across Europe. As Nancy mentioned, we've hired the brand x salesperson who is focused on brand x across Europe and promotions and the picture there is Cadillac. We've had numerous electric car promotions across the state in Germany. We did our first brand x booking for Playmobil, in a mall, just outside Paris. By Euro Disney, which was a great success. And we've won our first exclusive malls, so kind of mirroring our model in the U.K. where we exclusively manage all aspects of commercialization for a shopping center owner, in this case, euro fund. So we take that Central in exactly a week or a week in a day on the first of October. So we'll be managing all promotions, exhibitions, advertising, brand experiences into that center.

And so obviously, when we look at the outlook for the business and looking forward to H2, we will continue to roll out our Rock Up and Pop Up service, both in the U.K. and overseas. We're obviously delighted to have that Network Rail contract. And you can see the scale of the activations, and that's the other 50th anniversary on the right. These are huge concourse dominating brand activations that we're running. And obviously, Andrew alluded to the fact that we are expanding internationally, now working with a number of overseas property companies using Germany as a base for that but hopefully bringing brand experiences and retail into other countries around Germany. We're looking currently at the Netherlands, Luxembourg, Czech Republic, Austria, and possibly, France, and Portugal moving forward. So here is the claimer bill promotion that Andrew alluded to that took place in [indiscernible]. So overall, we've had a really good start to 2024, and that performance did continue over the summer months. It's not just the Brand Experience division that's performing well. All of our divisions are performing well. And obviously, people were worried about the NR and ECE contracts. Both of those have now been extended for a further 5 years. And we're really focusing now on reducing our debt and improving our balance street, but also continuing with the good sales that we've had so far this year.

Thanks, Nancy. And we now published this -- just showing the highlights of the income statement and also the cash flow forecast -- the cash flow statement, sorry, that's in there. We've had a number of questions since we've come online, and some of them are asking further questions on the results of the business. So probably I can address those through the questions that have been asked rather than going through these last 2 slides in any great detail. We'll also be available to take any other questions that come after the close of the presentation as well. Nancy and Andrew, we've had some questions, a lot of good questions. And I thought I'll just go through those with you if you don't mind. The first one probably point at both of you, maybe you, first, Nancy, but Robin has asked, with the continued success of Rock Up and Pop Up kiosks in the U.K. and Germany, what feedback has a company received from retailers and landlords in these markets and other opportunities to introduce this concept in additional countries or new types of venues?

Yes. Okay. I'll deal with the U.K. business first. And from a landlord perspective, very much welcomed. And we're bringing new and different products into centers. Our job is to be at the bottom of the retail escalator, people or customers, retailers that come on to our Rock Up and Pop Up service. Come on at the base of the escalator, rolling these for them to eventually invest in their own kiosk and then ultimately, be a unit taker at the center. So the U.K. landlords are very pleased to welcome our service and have done so with open arms that's why we're in centers such as Trafford, Westfield, Bluewater, et cetera. From the retailer's point of view, as you would expect, it's a brand-new business. We've had some huge successes, and we've also had some lumpy bumps so well. But if I can name one, it's the Just Bee Honey business, which started off with 1 retail kiosk in Trafford. The guy had only sold out the [ bridge ] of a car before and is now in 5 major U.K. centers permanently. So yes, varying results but many of them doing extremely well from it. And the third part of that question was, can we do this in Europe? The answer is absolutely yes, and we have just started to look at retailers who we can do that for.

Thanks, Nancy. Another question that has come in is what material impact, if any, will the resolution of train strikes half of our business?

A positive one. The Brand Experience market was interrupted. It led to bookings being moved and canceled and also uncertainty from brand x agencies who were debating whether to choose a station as a venue or perhaps a city center or a shopping center or another venue. So the resolution of the strike is great news for us.

Okay. Thanks, Andrew. There's been a number of questions along the similar lines. So I'll just pick the highlights out of that for me to answer more around the numbers in the results. One of the questions is that could we explain the GBP 830,000 increase in the receivables balance? Yes, that's fairly straightforward to explain. June '24 was one of the best months that we've had in trading in the U.K. for a very long time, remarkably buoyant for the time of year as well. And that's just like at the end of June, we were owed half significant amount of money for activity that had happened in that month. So it very much increase compared to what we've seen in June the previous year. That receivable has come in since the half year-end. So there's no risk to that. It's just as a result of better trading that we've seen that happen. And another one that's been asked -- so 2 questions that are probably similar here, somebody is asking about the net liabilities on our balance sheet overall or the net current liabilities. Very much the focus of the Board of the company that we addressed that. We took out significant borrowing during the pandemic, and we're in the process of repaying that just now through good cash flow, but also returning to profitability and driving profits in the business. That will be our focus for the next few years as well as just driving that to strengthen the balance sheet. And one of the other questions which kind of goes hand-in-hand with that is I'm being asked about when there's likely to be a resumption in dividend. Although we have historically been a dividend paying company and we're keen to return to that in the future, for the time being, that's not our main focus. You will see that we have negative distributable reserves just now, and we're not intending to try and convert any of our share premium of the time being into distributable reserves in order to pay a dividend. We see that is very much in the company's best interest to improve the balance sheet strength, repay the debt before we get back to there. So margins, we are focused on doing that in the future, it certainly will be in the next couple of years. There's also a number of questions as well with people asking how trading has gone since the half year numbers, what Q3 has looked like and people looking for some steer on what bookings are looking like in Q4 if we can see them? Nancy, do you want to answer that?

Yes. So I mean we are on target in Q3. And as we've, I think, previously covered before, 40% of our promotions income or 45% of our promotions income is booked very late in the day, sort of 6 to 8 weeks before it activates, which makes Q4 difficult for us to predict at the moment. However, we are feeling positive about the market in general. So yes, I mean, without giving a forecast, we are -- we do have a positive outlook on the business for Q4.

Okay. Thank you. So I see some other questions come in at the bottom as well around about the civil's debt that we have, and how we are paying that. You'll see from our accounts, we're repaying that at the rate of GBP 322,000 of capital repayment every year. And we've been paying it down in line with that over the last few years. There comes a point in early 2027, where we have a final pay down, which would be GBP 0.5 million at that time. And we would hope to prepay that debt, if not before, then certainly at that point. We are not constrained by our debt and net to what to do. We currently operate with substantial headroom. We also have significant overdraft facilities in GBP 0.75 million, which we never go into , we haven't utilized them at all since we took them out. So we have plenty of headroom, and we anticipate having even more headroom by the time that comes around. We are paying some of these, last what we're paying on the, I think the relevant information contained within our accounts, especially in 2023 year-end accounts and nothing much -- or nothing has changed since then in terms of and what the rates are on them. We're being asked if we are confident in hitting our full year targets.

I think the answer is yes. We are feeling positive about the end of the year.

Yes. I would say so. We -- as you've mentioned that we'll get more visibility as the year progresses, especially into October and then to the start of November. And if we've got any information that we want to or need to update the market with, we will do it at the earliest point that we can. The analysts have talked about that in terms of what their forecasts are, and they just see potential movement on the upside rather than on the downside now. We haven't felt the need to contradict them or not at all. I think that's it in terms of the questions that we've got. So...

Gregor, Nancy, Andrew, if I may just jump back in there. Thank you very much indeed for being -- for your time then addressing all of those questions that came in from investors this afternoon. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. And just for you to review, to then add any additional responses, of course, where it's appropriate to do so. And we'll publish all those responses out on the platform. But Nancy, perhaps before really just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with, that would be great.

Yes, I think my closing comments will be it is great to have signed our 2 benchmark contracts for a further 5 years and that has been achieved in this half. It's also great to be making strides in Europe, and we hope to continue that work in the second half of the year, where we are continued in the second half and half of the year and into 2025. And as Greg and I have both said, we do feel positive about the end of the year without giving too much detail away. We are feeling like we're on track for our end of year. But most of all, I'd like to thank you all for joining, and I hope that this has been a useful session for you. Thank you very much.

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