SpaceandPeople
SpaceandPeople |
Bowling along |
Year-end trading update |
Media |
1 February 2016 |
Share price performance
Business description
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Analysts
SpaceandPeople is a research client of Edison Investment Research Limited |
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SpaceandPeople (SAL) has added another major client, British Land, starting with Drake Circus in Plymouth, then across its broader multi-let retail portfolio in due course. This follows on from last year’s landmark contract win of Network Rail. The trading update confirms that underlying FY15 results were in line with expectations (although an accounting adjustment pushes some net revenue recognition into FY16). With a cash-positive balance sheet and 10% uplift in the dividend, SAL’s shares have yet fully to reflect the positive momentum in the newsflow.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/13 |
14.6 |
2.5 |
10.1 |
4.1 |
5.5 |
7.3 |
12/14 |
15.4 |
1.2 |
3.9 |
2.0 |
14.4 |
3.6 |
12/15e |
15.5 |
1.3 |
4.3 |
2.2 |
13.0 |
3.9 |
12/16e |
17.7 |
1.9 |
6.7 |
2.4 |
8.4 |
4.3 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Major new contracts drive growth
FY15 was a major year of transition for SAL, with the launch of the Mobile Promotion Kiosk (MPK) concept (and associated investment programme) and, importantly, the validation of the value of its promotional offer from the Network Rail contract win. Adding the British Land shopping centres is further reinforcement of SAL’s credibility as an operator and should help to increase the visibility of promotional and experiential marketing within the mix of marketing spend. The early-stage pilot with Immochan in France (commenced 1 January 2016) further increases the geographic reach and is being run on a low-risk basis.
Underlying performance in line
With the timing and scale of the British Land contract so recently won, we are not yet in a position to model the financial implications and our FY16 forecasts are not adjusted. We will do so after the publication of the final results on 19 March. Trading in H215 was in line with management expectations, although the reported figure will appear lower than market forecasts. This relates to a decision to recognise £150k of net revenues from the MPKs on the same basis as that of Retail Merchandising Units (RMUs), a decision that helps future revenue visibility. Our presentation of pre-tax profits is before the attribution to minority shareholders, so the underlying £1m indicated by the company is in line with our previous £1.4m forecast. Earnings per share of 4.3p will have benefited from a reduced tax rate stemming from accelerated capital allowances on investment in MPKs.
Valuation: Discount overdone
The share price has drifted following the positive news of the Network Rail win last September. This resumption of positive newsflow underpins the stock’s growth credentials. We expect the valuation discount to other smaller marketing services stocks to narrow from the current 31% on December 2016 P/E, 38% on EV/EBITDA.
Financial summary
Exhibit 1: Financial summary
£'ms |
2013 |
2014 |
2015e |
2016e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
14.567 |
15.446 |
15.473 |
17.700 |
Cost of Sales |
(4.023) |
(5.839) |
(5.900) |
(6.500) |
||
Gross Profit |
10.544 |
9.607 |
9.573 |
11.200 |
||
EBITDA |
|
|
2.657 |
1.616 |
1.723 |
2.418 |
Operating Profit (before amort. and except.) |
2.293 |
1.155 |
1.270 |
1.921 |
||
Intangible Amortisation |
(0.014) |
(0.019) |
(0.025) |
(0.025) |
||
Exceptionals |
0.000 |
(0.391) |
0.000 |
0.000 |
||
Other |
0.000 |
0.000 |
0.000 |
0.000 |
||
Operating Profit |
2.279 |
0.745 |
1.245 |
1.896 |
||
Net Interest |
0.160 |
0.018 |
(0.020) |
0.007 |
||
Profit Before Tax (norm) |
|
|
2.453 |
1.173 |
1.250 |
1.928 |
Profit Before Tax (IFRS) |
|
|
2.439 |
0.763 |
1.226 |
1.903 |
Tax |
(0.648) |
(0.166) |
(0.180) |
(0.386) |
||
Profit After Tax (norm) |
1.805 |
1.007 |
1.070 |
1.542 |
||
Profit After Tax (IFRS) |
1.791 |
0.597 |
1.046 |
1.518 |
||
Minority interest |
0.180 |
(0.140) |
(0.250) |
(0.250) |
||
Average Number of Shares Outstanding (m) |
19.5 |
19.5 |
19.5 |
19.5 |
||
EPS - normalised (p) |
|
|
10.1 |
3.9 |
4.3 |
6.7 |
EPS - (IFRS) (p) |
|
|
10.1 |
2.3 |
4.1 |
6.5 |
Dividend per share (p) |
4.1 |
2.0 |
2.2 |
2.4 |
||
Gross Margin (%) |
72.4 |
62.2 |
61.9 |
63.3 |
||
EBITDA Margin (%) |
18.2 |
10.5 |
11.1 |
13.7 |
||
Operating Margin (before GW and except.) (%) |
15.7 |
7.5 |
8.2 |
10.9 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
9.822 |
9.617 |
9.840 |
9.218 |
Intangible Assets |
8.232 |
8.243 |
8.218 |
8.194 |
||
Tangible Assets |
1.590 |
1.374 |
1.621 |
1.024 |
||
Investments |
0.000 |
0.000 |
0.000 |
0.000 |
||
Current Assets |
|
|
7.225 |
6.336 |
5.308 |
7.418 |
Stocks |
0.000 |
0.000 |
0.000 |
0.000 |
||
Debtors |
4.329 |
3.864 |
3.868 |
4.425 |
||
Cash |
2.088 |
2.115 |
1.150 |
2.117 |
||
Other |
0.808 |
0.357 |
0.290 |
0.876 |
||
Current Liabilities |
|
|
(7.027) |
(5.915) |
(5.313) |
(5.681) |
Creditors |
(6.822) |
(5.665) |
(5.063) |
(5.431) |
||
Short term borrowings |
(0.205) |
(0.250) |
(0.250) |
(0.250) |
||
Long Term Liabilities |
|
|
(0.010) |
(0.260) |
(0.660) |
(0.210) |
Long term borrowings |
0.000 |
(0.250) |
(0.150) |
(0.150) |
||
Other long term liabilities |
(0.010) |
(0.010) |
(0.510) |
(0.060) |
||
Net Assets |
|
|
10.010 |
9.778 |
9.176 |
10.745 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
2.499 |
1.723 |
0.756 |
2.230 |
Net Interest |
0.160 |
(0.018) |
(0.019) |
0.007 |
||
Tax |
(0.375) |
(0.898) |
(0.162) |
(0.347) |
||
Capex |
(0.593) |
(0.275) |
(0.650) |
(0.350) |
||
Acquisitions/disposals |
0.000 |
0.000 |
0.000 |
0.000 |
||
Equity Financing/Other |
0.039 |
0.000 |
(0.400) |
0.000 |
||
Dividends |
(0.681) |
(0.800) |
(0.390) |
(0.569) |
||
Net Cash Flow |
1.049 |
(0.268) |
(0.865) |
0.971 |
||
Opening net debt/(cash) |
|
|
(0.834) |
(1.883) |
(1.615) |
(0.750) |
HP finance leases initiated |
0.000 |
0.000 |
0.000 |
0.000 |
||
Other |
0.000 |
0.000 |
0.000 |
0.000 |
||
Closing net debt/(cash) |
|
|
(1.883) |
(1.615) |
(0.750) |
(1.721) |
Source: Company accounts, Edison Investment Research
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