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

Good afternoon, and welcome to the SpaceandPeople plc Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd like to hand you over to the management team. Good afternoon.

Good afternoon, and welcome to our 2026 interim results presentation. Just to show you the first page of our presentation, you should be seeing a lovely picture of Dutton Ranch, which is one of our big activations that took place on Waterloo Station earlier this year. And as you can see, a massive experiential activation also linked up with the screens on behalf of Paramount Films. So many of you on this presentation will know us. We provide space and services to promote brands, sell products and acquire customers in high footfall venues. Why is this attractive to you as an investor? Well, as traditional advertising becomes more fragmented and digital acquisition becomes more expensive, pop-up face-to-face activity is evolving from a sales channel into a customer acquisition and brand building medium. We are the only player in this market with operational capabilities. So we can take brands on a complete omnichannel journey from being fully digital to being a physical retailer in any venue. The photo here is an example of that. This is VIEVE Cosmetics, a Scottish digital cosmetics brand, which has carried out a Rock Up and Pop Up with us. It did a one-off Rock Up and Pop Up with us last year and has now turned that into a roadshow and is running that at the moment throughout venues up and down the country using our system to engage with customers, sell products and collect customer data. So I'll hand over to Gregor to talk about the core financials.

Good afternoon, everyone. Just to begin with some of the highlight points. Revenue, first off in the graph, you can see that our revenue for the first half of 2026 was at a similar level to the first half of 2025. We are very pleased with that overall because we felt that 2025 was particularly a high watermark for us because we had a number of brand experience events in H1 that we didn't think were going to be replicated in 2026. We highlighted that last year and also in our year-end 2025 outlook. It's -- those events didn't reoccur, but we managed to make up the revenue to a great extent with other promotional activity in the U.K. and also with an increased level of turnover in our German business. That said, our operating profit, which we had last year, which was quite anomalous for us in H1, came back to being a slight operating loss this year, which is probably in line with what we expected. We would have done slightly better, but there were some particular things in the German business that we were cognizant of that we'll talk about slightly further on in the presentation, which meant that, that slight operating profit became a slight operating loss, although that doesn't really affect what we think we're going to do for the full year. Our cash position continued to grow, which was very encouraging. Compared to this time last year, our net cash was up over GBP 200,000 despite having spent about GBP 575,000, GBP 185,000 on our new digital platform in the interim. We will talk a bit more about that as we go on. And then just the final key metric that we normally disclose is our basic earnings per share, which again has just down into being slightly negative this year. But as you can see, apart from the anomaly of last year is pretty good compared to where we would normally be at this time of year. The main financial highlights for us were, again, that we maintained group revenue where we didn't necessarily think that was going to be where we were before the half year started. Although the U.K. promo division showed revenue down about 6% due to big events such as tobacco replacement product advertising not being replicated in 2026. Other areas of our business, such as customer acquisition side of things where we were putting mainly utility companies and pet food brands being the bigger spenders compared to last year, that drove significant increases in that side of our income stream in 2026. Kiosk revenues in the U.K. were also up in the first half year as our Rock Up and Pop Up offering continued to grow. H1 has historically been the lower side of the year for that, and we're anticipating that growth to be replicated in H2 as well. In Germany, the revenue was up 10%, which was very encouraging because we had a number of new retail clients and a number of new venues in Germany compared to last year. However, that was affected by some one-offs where we had, in particular, one retailer who we brought over to Germany from the U.K. went into administration, both owing us some rent, but also leaving us with rent that we had to pay on some venues that we still had to commit to even though they were no longer trading. And we provided for that in H1 because that was a cost we had there. That is a one-off. We don't see that being replicated in H2, and we caught that early enough. Overall, our gross profit was down, as you will see in our results, by 5%, but still in line with what we were expecting as a management team, although we don't give half-year guidance to investors at that point. And the loss before taxation just effectively followed that as well. Our cost control in the U.K. and in Germany has been good. We have managed to bring in new staff that will help drive the business forward, especially staff that are customer-facing. And we've done that without really increasing our overall overheads. As I said, net cash inflow was good and our cash inflow from operating activities of GBP 80,000 in the first half year, despite making a trading loss in that period, is really just because of movements in working capital, just timing differences there. Our net cash position was up from last year. We don't have any borrowings in the group at half-year-end nor since the half year, although we do have an overdraft facility of GBP 1 million that we are utilizing just for the headroom that, that provides us. And if I can hand back to you.

Yes. So 2 things really to point out on -- 3 things actually on this slide. First of all, most of you want to know this, full year '26 trading remains in line with management expectations and with market expectations. We are investing heavily at the moment, as Gregor alluded to, and going through a complete digital transformation in the business. And we've been doing that during this year, which involves a new customer-facing website, technology enhancements designed to automate a lot of the processes that we do manually at the moment and for data enrichment purposes and new systems aligned to support the evolving habits of space buyers. Aligned with that, we're also investing in additional client-facing staff to drive future revenue growth. So they're the main operational highlights. If we can move on to the U.K. We did say at both the interims and the end of year last year that we had an anomalous H1 in 2025 and that has proved to be the case. So we've returned to a more normalized pattern of bookings in Brand Ex, although I will say it is up on 2024. The 2025 result was heavily influenced by tobacco replacement products taking huge amounts of space, particularly at Network Rail, well before they decided that they didn't want to have those promotions in their stations anymore. But there has been quite a clamp down anyway on tobacco replacement products doing any advertising or marketing. Where we've seen the growth in brand experience is in the beauty sector. This has now become a core face-to-face acquisition has become a core way of the beauty sector reaching out to their audience. Beauty is obviously a touchy-feely kind of activity. And therefore, digital isn't working as well for them. So they're very much using experiential as an approach to this. We've seen big brands like Chanel and Dior down to little high-street brands or more low-cost brands taking space. And we've also seen a huge growth in Chinese automotive brands taking temporary space from us. I think over the last year, we've had Chery, Jaecoo, BYD, Omoda and Lafa all taking space in centers to do short-term activations. As Greg also alluded to, we've seen strong growth in both acquisition and subscription. As you would expect, the power companies are all out doing a lot of activity, wanting to sign new customers up to direct debit. We've also done a lot of work with subscription brands. And obviously, customers sign up for subscriptions because of the convenience factor, an awful lot of activity in the pet food sector, but general food box sectors as well, good growth shown across the board in that. And then our star product, Rock Up, continues to develop with bookings. And emanating from beauty, I talked about the growth in experiential beauty. We're also seeing it in Rock Up Beauty with a number of sort of K-beauty brands taking space with us. We're also seeing permanent jewelers. That's when you have your jewelry welded to you taking space. And we've also now got TikTok trending brands, specifically in the F&B area, taking space. This product seems to have -- seems to really resonate with brands wanting to go on omnichannel but not knowing how to do it. They can definitely take their first steps with SpaceandPeople. And aligned to that, we're investing in business development staff to go out and work with brands to get them to take the omnichannel approach. So we've invested in a number of new business development staff designed specifically to target major brands for Rock Up and Pop Up and for general space bookings.

Germany has been relatively positive in H1. We attracted new retailers. We set ourselves a target of expanding the retailer base from the kind of small independents that is the vast majority of the business to better-known retailers. Unfortunately, one of the ones that we brought over from the U.K. then went bust, which we then had to increase our bad debt provision to cover. The focus still remains on getting bigger and better retailers. And on -- we've hired a marketing manager to drive that ambition. The credit control we focused on, we've got an additional resource in credit control now, and that's working well going into H2. As I said, it was a blow to write off the bad debt to the extent that we had to in Germany, but that's now behind us. We continue to work with all of the major owners in Germany. ECE, we've worked with for many years, and we've got a long-term contract still in place with them. And other newcomers to the market are using us to exclusively manage their venues, which is very pleasing, and we expect to add to those venues next year.

So the outlook. So the performance has been in line with what we thought it was going to be for the half year. We anticipate meeting market expectations for the full year, and that would put us on track to have our best year since 2017, which we're absolutely delighted about. The launch of our new systems will obviously revolutionize the business, and we're also looking to the future. And during the year, we've got a pipeline of AI tools designed to support buyers in their quest for the right space and focusing very much on the data insights database that we've got to assist buyers make the right choice of venue for their product. We've also got a strong U.K. venue pipeline for exclusivity, and we're looking as well at further new venue wins in Germany.

Okay. We finished the presentation part of this with just the key financial highlights. Here, you can see the revenue and the operating profit for each of the divisions that we had. So you can see that U.K. Promotions managed to maintain the operating profit that it had despite a slight reduction in revenue, where we were very happy with that. We're a more efficient business than we were previously, and we hope to be able to continue that going forward. U.K. Retail shows its slight increase in revenue and profitability since H1 last year, which was in line with our expectations. And then Germany, as we talked about, despite the increase in revenue and we did have these one-off hits, which meant that profitability in Germany was lower in H1, although we do expect Germany to return to its normal levels of profitability for H2. Head office costs remained stable compared to last year despite having additional resource in some areas and our investment in marketing, in particular, in the U.K., and finance costs were reduced down to zero as we no longer had any borrowings during the first half of 2026. On the cash flow side of the business, you can see that our cash flow in H1 was pretty much even across the period with the exception of the investing that we had in our new website, which will go live soon, which meant that at the year-end, we pretty much -- at the half year-end, we had a cash balance of just over GBP 1 million but with no bank debt at time as well, which puts us in a very strong position going into traditionally the much more cash-generative second half of the year. I think that pretty much finishes the formal part of the meeting. We've had a few questions coming in, and I can read those out and ask Nancy, Andrew or I will answer them or I'll answer them myself.

The first question that has come in is, can we say a little bit more about how the web booking platform will work and how it will match buyers and sellers or how we can use AI tools as part of that to help our business? Nancy, would you like to cover that off?

Yes. So no, the web booking platform doesn't directly match buyers and sellers, but it obviously does include search. The AI element of that will be that it will be a much more intuitive search thing that you can put into the query. And you can also ask it will also deliver you the right venue based on insights, space and location. So it will be a very sophisticated model that it will be able to deliver. So the AI search will be for consumers. Yes, I think that says about as much as I can about the booking platform.

Okay. Thank you. The next question that came in was in relation to revenue where we've been asked what percentage of our revenue is recurring or repeatable? And how much visibility do we have over revenue entering each half of the year?

Do you want me to take that?

Yes, please.

Well, obviously, our business is pop-up in short-term. So there is an element of lack of visibility. However, most of our business at the beginning of the half year, we can map very accurately. The only sector which is difficult for us to see is the Brand Experience sector. That is very much booked with a sort of 4-week from pitch to activation window. So at this stage of the year, we can see our end of year in all of the divisions, except the Brand Experience division. And as an example, we had a very high percentage of our business, over 50% in September, booked in the month for the month. So yes, that is the only bit that we can't see. You asked about recurring revenue, not that much is recurring, repeatable is very much the case.