SpaceandPeople plc (SAL.L) Earnings Call Transcript

Good afternoon, ladies and gentlemen, and welcome to the SpaceandPeople plc Investor presentation. [Operator Instructions] the company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so, and these will be available via your Investor Meet company dashboard. Before we begin, if I may, I would like to submit the following poll. And I'd now like to hand over to CEO, Nancy Cullen. Good afternoon.

Hi there. And as described, I'm the CEO of SpaceandPeople, Nancy Cullen, and I'm accompanied by my CFO, who is Gregor Dunlay. And before we start our presentation of our end-of-year results, we thought we'd just take you through a quick introduction to the company just for anybody who's on this platform that doesn't know what we do. So if you can just help me through to the first slide, thank you. So essentially, we are Europe's largest agency supplying promotions and retail commercialization solutions into the retail property and transport sector. We've been around for 23 years. We're a fully in-house business, and we're market leaders in the sale of promotional spaces, and we have an operations division. We've got a warehouse in Essex and a team of staff who can deliver in store, maintain units. And we subject every booking that we make with our client venues to extensive due diligence and compliance procedures. And for that, we're fully ISO accredited. We're also market leaders in the provision of high-value experiential activity, and you may recognize some of the big venues on this list but we represent many large U.K. shopping centers and also the U.K. London railway station network, which includes Waterloo, Victoria and Kings Cross. And if you look at our services, there's 4 headings here, but the 2 to concentrate on are the brand experience business and the retail business, that being 80% of the bookings that we make. Brand experience comes in a number of forms. Major one-off brands activations or road shows, which are traveling experiences that go around to different venues in the country or they can just be brand to hand sampling. And if you look at retail, that also appears in lots of guys is we put long-term retail kiosks into venues. We've got our own product called Rock Up and Pop Up, which is a product for new and online retailers. All the retailers can be supplied by the operator or we put stuff -- we put business into shop units. And 20% of our business is also local business or customer acquisition. Just to show you what a Brand Ex looks like. This is the Lion King at Manchester Piccadilly just an idea of a brand activating. In 2022, just to give you an idea of the scale, we put 229 different brands into 216 venues. This is Sky Glass in Nottingham. This is for the platinum jubilee, just showing you this is how brands activate can be indoor/outdoor. This is Superdrug at Kings Cross. And this is a road show that we put all around the country, which was -- they launched a film for DC Super-Pets. This is in the Metro Center. And this is all now transacted via our sales staff. We've also got an online platform that we launched last year. And talking about retail, as I said, we do retail in number of forms. This is our own kiosk that we put into venues. And this is a network rail kiosk that we put on to Network Rail concourses, and it [ says here, ] we placed over 440 different retailers into over 160 venues last year. And the retail can also have its own kiosk. It can be a retailer who comes along with their own kiosks. It's just a few examples of the brands that put their own retail kiosks into our venues last year. And we're leading the market in trying to provide solutions to get new retail names into venues. And our latest product is one called Rock Up and Pop Up that we launched last year. This is a complete Pop Up solution where we manufacture and install the kiosk, do the business and merchandising plan for the retailer, supply with staffing, supply them with payment's equipment. They then trade and then we remove the kiosk and that is our unique Rock Up and Pop Up solution. And there's a few examples here of how it looks in action. These are a few of our kiosks incentives over the last 12 months. So that's the introduction to the company. We're now going to move on to presentation to talk about our end of year results. And this is yet another Rock Up and Pop Up kiosk. This is mindful living at Lakeside. Gregor, can I hand over to you for financial highlights.

Yes, absolutely. Hello, everyone. Just to give you a brief run-through of our 2022 results. We have shown [ the real ] in comparison with 2019 and 2020 as well as the previous year. It's given an indication of how we're recovering back towards pre-pandemic levels. You'll see that our revenue came in on expectation at GBP 5.5 million, which was better than 2021's GBP 4 million and getting back towards where we were in 2019. And U.K. promotional retail and our German -- sorry, U.K. promotional revenue and our German retail revenue were very much back towards the pre-pandemic levels with only U.K. retail still significantly behind, and we'll come on to the reasons for that later on, right? The result of that is that our core operating results were pretty much at a breakeven level. And comparing that to last year, when we stripped out the effect of government support that we had received that was significantly better than we had done in the past couple of years and back almost to the levels where we're at in 2019, which is encouraging that we are a viable business that's looking positively to the future and hoping to deliver good results in 2023 as well. And people will see that the net cash inflow of GBP 0.5 million is a little bit incongruous with results, given that we've also repaid a significant portion of our debt during 2022. And that's tied up in working capital movements that to be able to explain in more detail if anybody is interested. We finished the year with good cash headroom, and we will continue to pay down our debt as planned during 2023.

So the operational highlights for us during the year, it was a strong performance even though Q1 was still affected by COVID. And basically, we replaced the government support we had in 2021 with revenue in 2022. And even though we still had a bit of COVID effect perhaps in January and February of 2022. And Pop Up retail remained strong throughout the year, and we launched a new product in Rock Up and Pop Up. And the brand experience took longer to return, but we had a really strong -- in fact, we had our best ever December despite rail strikes affecting some of our key stations during that time. And we looked at our German business and took some first steps into expanding that business with the developer ECE that we've worked with for the last 7 or 8 years, and we opened some units in Austria. So looking at revenue, that increased in the U.K. by 41% to GBP 3 million. The retail revenue was slightly less than that, up 21%. It should be pointed out that retail revenue for SpaceandPeople also includes promotional customer acquisition revenue that goes on to our mobile promotions kiosk and customer acquisition revenue has been affected over the last 12 months by staff shortages and by overall economic conditions. So that didn't increase by quite as much as the promotional revenue. As I said before, we launched our new retail product, Rock Up and Pop Up, specifically designed to attract nascent online retailers and to grow them into kiosk users and hopefully into long-term unit users. And we launched a new website resources for brands to assist their research, which was our platform called experientialspace.co.uk which features all the demographics and footprint of our key venues. In Germany, we had 48% increase in revenue, and that was driven by an increase in the number of kiosks in operation. That went up from 56 to 78 during the year. We also managed to reduce costs in Germany by moving our office from Hamburg Airport into Central Hamburg, and by reducing the head count very slightly. And in Germany, it was the first time that we -- as I said before, worked with ECE to put a trial of units into Austria using Germany or German operation as the base, and we launched 2 retails in Seiersberg shopping center. So looking at the outlook, the SpaceandPeople, we see continued growth in the U.K. retail business, spearheaded through the development and rollout of our Rock Up and Pop Up kiosks, and this is a real opportunity for the business. I think we're the only business in the U.K., which offer a complete solution, which is staff included and which can get you into a venue very quickly. It's a turnkey operation and then move you back out. And we're looking to grow that during the year. We've got a real focus on brands experience and adding some data metrics into that to improve traction with agencies and to attract a higher amount of media spend into that area. We're keen to expand our German business further into Austria, and then we're also going to look at additional territories. And of course, we expect to return to profitability without the need for any further government support. So just to summarize, our core operational performance continues to recover. We're getting back to pre-pandemic levels across the board. We've got a strong retail business. We've always had a strong retail business, but we've also got new initiatives to get new early-stage retailers into the U.K. market. We're looking at a good Brand Ex business, and we think that this year, we'll get back to pre-pandemic levels. And of course, we'll continue to look at international expansion opportunities as the year goes on. And we've employed a consultant to work with us on that.

The presentation that we've done for people, which will be available on our website this afternoon also has some of the key profit and loss and cash flow figures on the back as well. There have been a number of questions submitted both in advance of the meeting and during the meeting. So Nancy and I are planning just to go through and answer as many of those as possible just now.

Nancy, the first one is in relation to the purchase of shares through the employee share scheme through the Employee Benefit Trust. So I'll take that one if you're okay with that.

I'm.

The purpose of the scheme is to buy shares against existing and future employee share options. When I say existing, is none of the ones predated 2022. But since then, the Benefit Trust purchased about GBP 50,000 worth of shares, which is just shy of 50,000 shares during the second half of 2022. That's been disclosed in the financial statements. And they show up on our balance sheet, just now looking very much like treasury shares. So you'll see them in the bottom half of our balance sheet. There haven't been any more purchases since the end of 2022. But in the future, we will look to do that again when it would be appropriate for us to do that. Nancy, the next question is about network rail. How big a risk is the renewal of the contract and how competitive may the tender be...

Well, the answer to that is we don't know how competitive the tender will be because the documents aren't out yet. We've got a very good relationship with Network Rail. We've obviously worked with them throughout the pandemic and throughout the rail strike period. We've introduced lots of new products to them, and we've done quite a lot of operational work using our operational results for them. However, everyone is right to point out, it's a contract which will be up for renewal this year, and we don't know how many people will be tendering for that.

Okay. And the next...

[indiscernible] first time in Europe like...

Yes. Thank you.

So the pipeline in Europe is obviously good because we haven't been in Europe, and we don't believe there are any companies quite like us in Europe. However, we're very mindful of our cost base, and we're using Germany as the sort of -- and the point of contact for any European operations. Our first sort of very small steps are into Austria, we'll see how that goes, and we'll take it from there. But yes, Europe is very much in our sights.

Okay. The next question asks what the repayment schedule looks like for the COVID loans that we have. Some of you may remember that when the CBILS loans came out, we, first of all, took out GBP 1 million loan -- term loan to help us through that initial lockdown period. We also had a revolving credit facility of GBP 1 million at that time, which preexisted COVID which we used as a working capital facility. Towards the end of the CBILS loan period, we took out a second CBILS loan of a further GBP 1 million, which effectively replaced that revolving credit facility that we had. And we also took out GBP 0.75 million of overdraft facilities, replacing the GBP 0.5 million overdraft facility that we had before. You see at the year-end that just over GBP 1.4 million of those loans remain payable now that the repayment rate of roughly GBP 350,000 a year. We will continue to pay that down in accordance with the time line that we have to pay that, which is slightly different for both loans. As at the year-end and as at now, the loans are fully drawn down. However, the overdraft facilities are undrawn, and we have never been into those up until now. The next question there is that we -- are there any new sites in the near-term pipeline or that we have recently signed up, Nancy, that we could announce?

We've always got a pipeline of venues that we're talking to, quite well now come to fruition. I couldn't answer you. But yes, Cannon Street, was a new location. And as I say, there's a long pipeline of venues that we're talking to at the moment, which we hope to bring to fruition during the year.