Small Cap Value Report (26 Sep 2016) - SAL

Monday, Sep 26 2016 by

Good morning!

It's a typical Monday morning - make a coffee, delete last night's Tweets, then brace myself for whatever horrors the RNS has in store. Today, the main headache comes from Spaceandpeople (LON:SAL) unfortunately, so I'll dissect that one first, below.

Incidentally, apologies for Friday's report failing to get off the ground. This was due to a complete lack of interesting announcements. A secondary reason was that my largest personal long position, in TWTR shares, delighted me by zooming up 20% on preliminary takeover approaches said to be from both Salesforce and Google. Other companies are also said to be interested. So I had to abandon my post here, and focus on that - whether to cash in, or buy more?

I ended up buying Call Options, which can be a nice way to play large cap takeover situations - limited, and precise downside (if it goes wrong, they expire worthless), but potentially exciting upside if a bid does occur.

There's an interesting section in the book, The Big Short about this. One hedge fund made a small fortune by spotting situations where call options were mispriced, in binary type situations (i.e. a takeover bid will either happen, or won't). As with most things in investing, easier said than done. Maybe they just got lucky?

Spaceandpeople (LON:SAL)

Share price: 28.5p (down 28% today)
No. shares: 19.5m
Market cap: £5.6m

(at the time of writing I hold a long position in this share, unfortunately)

Interim results, 6m to 30 Jun 2016 - the market cap here is now so small, it's well below my usual cut-off of £10m. However, as it's a share that I covered extensively in the past, it makes sense to update on the latest disappointment. I think an honest appraisal of mistakes is actually more important than crowing about the winners. Everyone makes investing mistakes, it's unavoidable.

Interim results here don't look great, but they're not a disaster either. The company makes its profit over the Xmas period, so interims are not particularly important. Key figures;

  • H1 loss before tax (continuing ops) of £174k (down from £62k profit in H1 2015)
  • £552k one-off hit from closing down S&P+ (we already knew about this)

This doesn't seem to justify a 28% drop in share price. So I'm wondering whether it's time to buy some more?

Outlook comments are concerning though, and…

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SpaceandPeople plc is a United Kingdom-based media specialist company. The Company is engaged in marketing and selling of promotional and retail licensing space on behalf of shopping centers and other venues throughout the United Kingdom, Germany, France and India. The Company's segments include Promotional Sales, Retail, Head Office and Other. The Company markets, sells and administers promotional space in a range of footfall venues across the United Kingdom, including shopping centers, theme parks, garden centers, retail parks and airports. The Company offers a service covering from consultancy services to the provision and management of retail merchandising units in shopping centers. It enables venues to market, administer, promote and sell their promotional space. Its subsidiaries include MacPherson & Valentine Limited, SpaceandPeople GmbH, Retail Profile Holdings Limited, POP Retail Limited, Retail Profile GmbH, SpaceandPeople India Pvt Limited and S&P+ Limited. more »

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  Is LON:SAL fundamentally strong or weak? Find out More »

13 Comments on this Article show/hide all

JDW72 26th Sep '16 1 of 13

Your tweets last night were hilarious. Note to self - make sure to check Paul's tweets on a Monday morning before he wakes up and deletes them.

You were proper ranting at yourself at one point whilst 99.99% of the population were fast asleep:-)

Cheese (and bad luck with SAL, well done with TWTR)

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andrea34l 26th Sep '16 2 of 13

I think SAL is yet another example, following my comments on Friday, of bad news coming in multiples; whilst one might be so emotionally attached to a share (not a good idea) that it might be tempting to hold as "it surely can't get any worse" (it can, and it could do), I don't understand any suggestion to buy more considering there's loads of other companies out there more worthy of attention :-/

The 12 month chart is not good at all!

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Orangetree 26th Sep '16 3 of 13

Feel sorry for shareholders, but the telltale signs were written on the wall for SAL because promoting in the shopping centre is in the past. Now, people know what they want or shop online before entering the store.

I did a piece back in 2014 about the turning point in business when shares were trading around 90p/share saying 50p was fair valued! Now it has broken past that level.

If you are a Boohoo or ASOS shareholder, you would understand the changing landscape of retail advertising. Given the big drop and 73% collapse from the peak, SAL is becoming a trading stock for traders!

Blog: Walbrock Research
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TMFMayn 26th Sep '16 4 of 13

"Incidentally, apologies for Friday's report failing to get off the ground. This was due to a complete lack of interesting announcements. A secondary reason was that my largest personal long position, in TWTR shares, delighted me by zooming up 20% on preliminary takeover approaches said to be from both Salesforce and Google. Other companies are also said to be interested. So I had to abandon my post here, and focus on that - whether to cash in, or buy more?"

Maybe you should broaden this report to include your holdings, even if they are large and growth rather than small and value, just to keep things interesting for us readers on dull days.

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Laughton 26th Sep '16 5 of 13

Re SAL - OK, so I'm not an accountant so please bear with me but in the interview Paul conducted with the CEO after the last "profit warning" didn't he say that cost to SAL of the closure of S&P+ would be in the region of £275,000? And now there's a one off charge of £552,000??

Maybe it's my aging memory (but I don't think so) or maybe it's my misunderstanding of the difference in the phrases "cost" and "one off charge" (much more probable).

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andrea34l 26th Sep '16 6 of 13

BOO is 98p :-)

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tabhair 26th Sep '16 7 of 13

Laughton - the £552k charge-off is made up of two parts. £252k for the capital value of the business itself on the balance sheet and £300k for the losses sustained by that business for the first half of the year.

I find their trading update a little strange. They talk again about being in-line with expectations (as per last update), yet these first half results are clearly below expectations even before you look at the expected S&P+ write-off. The big question is can we trust management and their guidance. If we can, this looks like value to me.

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andrea34l 26th Sep '16 8 of 13

A broker forecast reducing their target to 28p is not going to help SAL, surely... although considering the price was 28p when the broker announcement came out then it's not much of a forecast :-/

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aflash 26th Sep '16 9 of 13

In reply to post #151709

Trading pays

Buying at 45p after 2014 profit warning I sold when the network rail contract was announced in early 2015. Anyone who held until September doubled their money.

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ACounsell 26th Sep '16 10 of 13


I may have asked this before but could you tell me how you buy your traded options. Do you have an account set up with a broker and if so what is the maximum they want as a deposit in an account? It seems to me that traded options are quite difficult to buy for relatively small investors (leaving aside the complexities of pricing which you probably don't need to worry about in a binary situation like the one you describe!)


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Laughton 26th Sep '16 11 of 13

In reply to post #151724

For you and all other BOO fans - Front page of today's Daily Telegraph Business section :-

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ganthorpe 26th Sep '16 12 of 13

I notice that the little booths which littered the aisles of my local Designer Outlet have virtually all disappeared and been replaced by settees and large easy chairs , so I reckon the booths aren't expected back in numbers anytime soon.

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Teddy 26th Sep '16 13 of 13

Any thoughts on $ERGO? A intersting mix of pharmaceutical services and carried interest in drug developments. Its profitable and growing with cash in the bank for acquisitions. Half year report today.

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About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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