RE: Looking totally priced in30 May 2023 21:09
Shandy, the broker Zeus put out their broker note on SAL this morning at the same time as the accounts.
SpaceandPeople
SAL LN - Media
Focus turns to growth
UK and European consumer demand is weak for well reported reasons, and the outlook
for the sector is quite negative. That said, Space is trading well, offering flexible and low
risk promotional services for retailers, and utilising vacant retail space for property
owners. 2022a results were resilient and, overall, in-line with our estimates. The
outlook, even in these difficult times, is encouraging for Space’s flexible offering, and
trading has continued to recover in both the UK and Germany. The Group has built back
marketing and sales teams and made good new Board hires. We forecast a near 20%
uplift in sales in 2023e and a healthy COVID support free profit. Operational gearing is
high for when activity picks up further. As ever, we keep an eye on cash, but the Group
has good access to liquidity if needed. Our DCF-derived valuation remains 220p,
indicating good potential upside to the current share price.
Positive full year update and a Board refresh – Trading continued to recover through H2 as
shoppers returned to malls in the UK and Germany, and train stations in the UK. Full year revenue
was up 38% at £5.5m (Zeus estimate £5.5m). Notably, UK promotional revenue was up 43% to
£3m with activity almost back to pre-pandemic levels. Within the UK retail division, the new Rock
Up and Pop Up concept delivered £41k of revenue from a standing start and is proving to be
popular with early-stage retailers. Germany also recovered well, with revenue of £1.3m (2021a
£0.9m). Gross profit was £3.9m (2021a £2.8m; Zeus estimate £3.2m), the major variance was
due to mix effect. Further down the proforma, Space was loss-making with an adjusted LBT of
£125k, slightly short of our predicted breakeven position. These results were achieved despite the
phasing out of government COVID support. Year-end gross cash was in line at £1.9m but flattered
by working capital timing differences. A £1.5m goodwill impairment was recorded against the UK
retail business mainly reflecting higher borrowing costs and the discount rate applied to the cash
modelling of this unit. The Board is strengthened with John Scott and Michael Brown joining as
NEDs, both bring extensive experience in the retail and marketing sectors. The Group showed
good resilience in 2022a, laying the foundations for future growth.
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