SpaceandPeople (LON:SAL) has had a transitional year in terms of both its client base and its products and services. With the Network Rail contract and the more recent British Land wins, there is plenty of promise for future growth, clearly more than offsetting lower revenues from Retail Merchandising Units. Headline FY15 numbers were also affected by the translational effect on German revenues and slower-than-hoped build in revenues from S&P+. This is all factored into the rating, which remains at a discount to other small marketing services businesses, despite the premium yield.
Transformative potential of new initiatives
FY15 results reflect the shift in business model, with the decline in usage of Retail Merchandising Units (RMUs) and switch to the Mobile Promotion Kiosks (MPKs). German sales increases were offset by the shift in £:€ and a change in revenue recognition deferred £150k of net promotional revenues into FY16. Following a strong start, S&P+ has yet to build in the way initially envisaged, although it is showing good progress in the number of projects. The UK MPK business is picking up and occupancy in Germany is improving. However, these factors are overshadowed by the transformative potential of the five-year Network Rail contract, Immochan (currently running a pilot project) and, more recently, the British Land contract (see February note). It is early days for all these initiatives and the timing on returns from them are not yet clear. With additional levels of cost taken on board to support the growth, we have taken a cautionary stance and trimmed our FY16 numbers by 17% at the EBITDA level and by 21% on EPS.
To read the entire report Please click on the pdf File Below