I intend opening a position in any stocks mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Spaceandpeople Plc has a market cap of £12 million and markets, sells and administers space in high footfall venues, including shopping centres, garden centres, city centres, retail parks and travel hubs and has offices in the UK, Germany, India and Russia. They design and install as well as come up with ongoing visual merchandising for their customers.
What follows for the remainder of this post is what I noted down on 23 March 2015 when Spaceandpeople (LSE: SAL) published their prelims for the 12 months up to 31 December 2014:
This is an example of why not paying close enough attention to stocks as they crater is costly:
Space and people hit multiyear all-time lows during the second half of 2014 giving value investors an great opportunity to buy this stock.
As you can see from the chart I’ve previously set an alert at 40.25p so that I can buy if the market allows me to but I’m not sure it will go that far south again given the restructuring, cost savings and most importantly the growth potential of Spaceandpeople Plc.
Spaceandpeople’s 70% price decline in 2014
Loss of client– During 2014 a number of the Group’s contracts with significant clients came to an end and some were either not renewed or were renewed on a smaller scale. When the amount of business that we transact with an established client reduces, it can take time to replace this income with business from new clients. The Group is not overly reliant on any single client and the loss of a significant client, although unwelcome, would not put the viability of the business at risk.
Okay so Spaceandpeople Plc have been honest about the problems that led to their price decline.
Charles Hammond, Chairman continues:
…the reaction of the Executive and Management Teams in the business has been positive to these adverse conditions and the cost base of the business at all levels has been lowered, the effectiveness of the Sales Team improved and a new Mobile Promotions Kiosk product and service launched successfully. As a result, trading in the latter part of the year stabilised and also showed promising signs of growth
Consolidated comprehensive income fell 67% from £1,740,0000 to £568,000 which accounts for EPS reduction to 2.10p from 8.98p compared to the previous year on a fully diluted basis.
There is also significant balance sheet weakness insofar as current assets of £6,336,000 the majority of which is trade receivables is offset by current liabilities of £5,915,000. A very thin margin for error.
The key to unlocking the value of Spaceandpeople Plc stems from it’s recent commissioning of an external appraisal that highlighted key areas for improvement to the business:
During 2014 a number of senior roles within the Group were reorganised and rationalised. Through a process that involved a small number of redundancies as well as not replacing some individuals who left the business, we now have a smaller number of senior managers and directors that work closely as an executive team. This, along with the sales restructuring and some occupancy cost savings has enabled the Group to make significant overhead savings of around £700,000 on an annualised basis.
Spaceandpeople’s management have also made changes in each of it’s key divisions in an effort to foster growth during 2015 and have identified where they will look to focus their efforts including securing more venues for their kiosks.
They are trading way below their capacity to post positive earnings and to grow those earnings and at current prices the market is simply underestimating the new management team that have already made changes to the way they operate not only as a team but as a more focussed business with a new product offering for customers.
The sales team can now aggressively market something new that could potentially lift earnings with the help the cost cuts.
Spaceandpeople Plc look to be dealing with the problems that began with their disastrous trading statement of April 2014 that led to their share price decline of over 70% in the following six months.
How well the streamlined management and sales teams can recover lost ground in 2015 is anyone’s guess but at today’s historically low share price I’m willing to find out.
Long today at 59p, first target 80p