Spaceandpeople (LSE:SAL) — FY23 Results

0:01 Good afternoon and welcome to the SPACEANDPEOPLE PLC full year results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would

0:32 like to submit the following poll. And I would now like to hand you over to CEO, Nancy Cullen. Good afternoon to you. Good afternoon and thank you for joining this presentation. Given the weather today, thought I'd start off with a picture of a Christmas tree. So I was going to do a quick introduction to Space and People and this picture is actually of something new that we've done at a number of Network Rail stations this year, is get sponsorship of their Christmas trees and we'll talk about that a bit during the presentation. But for anybody who doesn't know us, this is Space and People and we're a company that is twenty four years old. Last year we did revenues of £5,800,000 which was up from £4,700,000 in 2022.

1:18 We're a fully in house business with offices in London and Glasgow. Market leaders in terms of what we do and we'll talk to you a bit about our products in a minute. We're not just a sales operation, we've also got a full operations division, a warehouse and a team of staff who deliver, install, maintain units, drop down bollards when they need to, to get events and activities into our venues. We do an awful lot of due diligence and compliance for every booking that we do and we're ISO qualified and accredited listed on the London Stock Exchange. And perhaps most importantly as far as our clients, which is property people are involved, is the fact that we're market leaders in the provision of high value experiential activity.

2:04 To sum we're Europe's largest provider of supply and promotions into the retail and transport sector. Just to show you the business, obviously Space and People UK is a retail and promotions business, but we've also got a German retail business which I'll talk about a bit later. Talking about our services, 40% of what we do is brand experience. That is in the form of big brand activations, sampling or road shows. And a further 40% of what we do is retail, which can be in all sorts of different forms. It can be pop up shops, it can be our retail kiosks, it can be retailers retail kiosks, it can be short term activity and it can be very long term activity up to five years.

2:52 And further, the remaining sort of 20% of our business is spread between local and customer acquisition and then vending and media deals. And then talking about our brand business, this is our platform where agencies can inquire about and look at the foot fall availability and demographics of all the venues that we represent. The website is called Experiential Space and we have added to that today with the launch in conjunction with the Institute of Promotional Marketing. We've added a new platform full of data insights called CORE and on CORE you can search by venue type, activity type and by time of year and look up results from similar branded products such as your own. So if you want to look up how food and drink performs at Waterloo Station, for example, CORE will give you the answers to that.

3:52 There's also the opportunity for agencies to share their own campaign results on this platform And that's available as of today on the IPM website, but SPACEANDPEOPLE are providing the data for it. And just to look at the scale of the brand business, I'm just going to flick through these. These are some of the brands that we booked in 2023. There's about two fifty of them, but as you can see major brand names, many of them not just booking one off activations but booking sort of multi week road shows and the list just goes on and on.

4:30 Right, I finished that part. And then talking about pop up retail, as I said before, we do all sorts of different retail. We do very short term retail and then we do up to five year leases. Our latest service is something called Rock Up and Pop Up and this is a service specifically designed to revitalise some of the shopping centres which have got very similar names in the mouths. This is seen as adding new and different into those mouths. And the reason this is unique to us is that we provide everything for the retailer. That includes the staffing, the space, the kiosk and essentially the retailer just turns up with their products and we do all the rest. And to show you the scope of this, this is Kate Spade, a major retailer who took a kiosk with us and put it into Westfield London in the run up to Christmas. So we deal with major brand names.

5:27 This is a company called Vishvare who had a concession on John Lewis and took that concession and put their products onto one of our stands, put it into the mall at Westfield Stratford and have now invested in their own kiosk and ultimately hope to be a retailer taking a retail unit at Westfield. And this is an example of the scope of what we do. This is an was a guy that sold honey out of the boot of his car and had a website and who's now expanded to become a retailer at Westfield Stratford, Westfield London and Bluewater and who's selling really well. It's vitamin infused honey wellness product And he's signing up a huge number of customers to his website every week as well as selling product. So that's just a bit of a flavour of what we do in terms of our products. Good afternoon everyone. Just moving on to the results presentation after that. We started on the front page with a picture of the other part of the Kate Spade campaign that we did around about Christmas time, where this was their holiday tree that they created at Waterloo Station, and there's a choir there as well. So it was an activation that that covered many aspects of what we do.

6:43 It was a great success for them. They were very happy with it, and it contributed in part to a very strong second half year and final quarter that we had as a business. We've put some graphs into the slides just showing the business over the past five years, just to show that we've now recovered to be back beyond where we were in the pre pandemic era, both in terms of revenue, where our revenue is higher than it was beforehand, our operating profit, where we've moved into having a reasonable profit for the first time in a number of years, our cash position, which was very strong at the year end, and we continue the recovery in the cash and the repayment of the debt.

7:31 And then all leading then to recovery in earnings per share, where we've got back to that level for the first time in a number of years. The business has recovered well and we will continue to benefit from that going forward. So operational highlights, strong growth in both The UK and Germany, especially in the second half of the year. Interestingly, our final quarter on brand sales was the strongest quarter in the history of the company, so testament to the fact that the brand experience business that was slow to come back after the pandemic has come back really strongly. Secondly, our rock up and pop up service, our full service for retailers is continuing to grow at a good rate.

8:24 And thirdly, our ECE contract, you probably all read the RNS that was out in the market. We've managed to secure a further five years on that with additional flexibility to move the units around into different venues and to do what we call just in time delivery of units, which means we can go into venues just for a very short period of time when we've got a great retailer for them. So moving on from operational highlights. UK performance, as I said, we had a 16% increase in promotional revenue, mainly driven by a big increase in the number of brands booking with us, particularly in the second half of last year. The great news for the brand business is that it's come back, as I said before, it's come back with a vengeance, that there's multiple brands in the market and that people do need to feed their online activity with pictures of themselves with interesting activities and events and that is probably one of the drivers behind the increase in experiential.

9:28 UK retail up by 28%. As I said, that's driven by the higher margin rock up and pop up rollout. We had 19 units in the run up to Christmas, we're hoping to do many more than that for the end of year this year. And finally, worth mentioning, our admin expenses were slightly higher than budgeted and anticipated. That was due to a bit of additional staffing because we had such an upswing in business in the second half of last year. A bit more investment in units and obviously inflationary cost increases. Moving on to the German performance. So the revenue increased by a significant amount in Germany by 43% to 1,830,000 compared with 2022.

10:16 That was mainly due to the fact that we had a number of new kiosks in operation. We've spoken a lot before about our international expansion and as you know we run a pilot test in Vienna, a shopping centre near Vienna last year and that is still in place. And we are looking to push the barriers of international expansion using the German business of Fulcrum for that. This picture is of an oat milk brand called Aui's that went into Centura Oberhausen and our operations team in Germany fitted that whole unit out. This is an area of development for us. We're hoping to get into more pop up shops, but we did the whole installation. That was an Instagram influencer event that we put in place for a month.

11:06 And finally, we've spoken a bit about the bedrock of this contract. The ECE contract is signed for another five years, which is great news for the company. Moving on to the outlook. Obviously, we have good opportunities to continue to grow revenue and profitability in 2024. You will probably want to know about the network rail contract. That is currently being re tendered for. It's an important contract to us and we have the contract until the September 30 when obviously we would hope to renew it but it's out for official re tendering. That doesn't mean that our revenues will fall off a ledge on the September 30 because

11:50 we do have the ability to book beyond that date. But as I said before, that's one of the important things that's going on in the business at the moment. The areas of expansion for us, further rollout of rock up and pop up, as I said before, it's proving incredibly attractive to premium malls, ones where we wouldn't have been able to put retail in the past such as Westfield London and Stratford are welcoming the innovation and the new products that these units are bringing into their venues.

12:18 And this market we see further growth mainly through the fact that we've today launched a data insights platform in partnership with an industry association, the IPM, the Institute of Promotional Management. We hope that will mean that we can grow the overall business for brands and agencies. There's never been an insights platform for agencies to be able to prove spend back to the brand and we're hoping that Core will be that very thing. And finally, we are looking at international expansion. We're actually booking quite a few brand exp briefs at the moment for the Euros and for the Olympics in Europe, which is creating some very interesting conversations with property groups. And we hope to move our retail business as well into Europe, as I said before, using the German business as our base for that.

13:12 So finally, a summary. It was a really good year, 2023. It was so great to get back into profit after the COVID years. As you can see, huge growth in UK Experiential and the German retail division did really well. And a successful rollout of a new product, Rock Up and Pop Up, which we're really proud of as it is an absolute USP for the company. We're continuing to pay off our debts and we've had a good start to 2024. So it's not the grassroots of recovery anymore. It looks like we're back up and running with a vengeance. So very happy with company performance for this year this year so far. And that completes the presentation. Thank you all very much for listening. We're happy to take questions now. That's great. Nancy, Gregor, thank you very much indeed for your presentation.

14:06 Ladies and gentlemen, please do continue to submit

14:08 your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via investor dashboard. Nancy, Gregor, as you can see, we have received a number of questions throughout today's presentation. Gregor, if I may now hand back to you and kindly ask you to read out the questions and I'll pick up from you at the end. Okay, thank you. Nancy, first question is really just carrying on from the last point you mentioned about the strong start to 2024. This question has been asked if you can give us anything else about current trading. I know that Zoos have put out a broker analyst note today about our 2024 expectations, but is there any more flavor you can give about how the start of the year has gone?

15:03 Yeah, I mean obviously we're a second half loaded business, so it's always the second half which is stronger than the first half.

15:10 But yes, we're pleased with the way the year has started so far. The brand business, although isn't at the absolute highs that it was at Q4 last year, it's still been much stronger than it was this time last year, for

15:26 example. I think also we seem to have good foresight on our brand business just now as well of what's booking into the summer, which is probably a bit better than we've experienced over the last couple of years with campaigns getting booked a little bit earlier. Yeah, think that's a very good point. We were getting brand briefs in that needed to be turned around and transacted within sort of two to three weeks. We're now getting about six to eight weeks, a more normalized picture emerging. Okay. And we've also been asked if we could tell people a little bit more about the European expansion and where do we see traction coming from in that? That's a good question. There is interest for brand experiences Europe wide from shopping centre owners.

16:16 And obviously we are fulfilling briefs that we get for international roadshows with the venues and the property owners that we're talking to. The retail business, which is of, is going to be slower to roll out, that is where we've expanded into Austria. But we're also looking at venues in Luxembourg, France and further venues in Austria at the moment. And those are conversations that we're creating through the brand business, but we're then carrying on and looking at retail opportunities with those owners. Okay. There's been another question which is probably one that I can answer quite easily, but somebody has asked, is there a risk of us delisting?

17:00 I would certainly say that listing has a number of advantages for us as a business and it certainly isn't something that we are considering doing anytime soon. We're happy where we are. The time being, the company will continue to be listed. One of the other questions that's been asked is about ancillary charges or ancillary income or operating income because that's where the profit comes from. It's due to the vagaries of German accounting really that goes in there. Effectively, it could be seen as an offset against our admin expenses, which you could put it there as well.

17:46 It's effectively charges that we have going the other way. So it's not really additional income that we are charging from other people. So it's probably a little bit difficult to understand, but that is to be offset against expenses rather than be considered as additional income. Another question that we've had is, are the rock up and pop up units in Europe built in Europe or are they shipped over? And do we have any operational concerns regarding European expansion? Do you want me to take that, We have a supplier in The UK but we also do build our own units in Germany. So no, we don't have any issues in terms of getting units into any of the countries that we're looking at operating in. Okay.

18:38 Another question that's come in is one for me to answer again. What metrics need to be met to restart dividend payments? Dividend payments aren't the focus of the business for the time being. The main focus is the recovery and profitability, the continued strengthening of our balance sheet. The main thing which would stop the restarting of a dividend just now is the company still has negative distributable reserves, which you'll be able to see. And while we have a strong share premium account that we could potentially convert to distributable reserves, The focus just now is not on dividends, it's on repaying debt, which as a board we have adopted as the prudent and sensible approach for the business.

19:27 We've also had a number of questions where people are asking specifically about the Network Rail contract, which is currently being re pitched by Network Rail. Am not really in a position to talk in any great detail about that because you can imagine it is commercially sensitive just now. Unfortunately, we'll not be answering those questions just now, which I'm sure you'll understand why. I don't think we have any other questions for the time being, so I think that's pretty much it. That's great. Thank you very much, Gregor and Nancy. Thank you for addressing those questions for investors today. And of course, any other questions, the company can review all questions submitted today. I will publish those responses on the Investor Me company platform.

20:14 But before we direct investors to provide you with their feedback, which I know is particularly important to the company, Nancy, could I please ask you for a few closing comments? Yeah, I hope you enjoyed the presentation. It's a really exciting time for SPACEANDPEOPLE. We're pushing ahead in three areas: in brand, in pop up retail and overseas. And I hope that today's presentation has given you a bit of a flavor of that. Thank you very much for listening. Thanks, everyone. Nancy Gregor, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of SPACEANDPEOPLE PLC, we'd like to thank you for attending today's presentation and good afternoon to you all.

21:08 Thank you.