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SAL - Spaceandpeople News Story

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Last Trade - 17/09/20

Sector
Consumer Cyclicals
Size
Micro Cap
Market Cap £1.07m
Enterprise Value £1.18m
Revenue £7.74m
Position in Universe 1779th / 1807

SpaceandPeople PLC - Final results for the year ended 31 December 2019

Mon 29th June, 2020 7:00am
RNS Number : 2962R
SpaceandPeople PLC
29 June 2020
 

SpaceandPeople plc

("SpaceandPeople" or the "Company")

Final results for the year ended 31 December 2019

SpaceandPeople (AIM:SAL) the retail, promotional and brand experience specialist, is pleased to announce its final results for the year ended 31 December 2019. 

Financial Highlights

Gross revenue of £17.3 million (2018: £18.8 million)

Net revenue of £7.7 million (2018: £8.1 million)

Operating profit before non-recurring costs of £0.1million (2018: restated loss of £0.05 million)

Basic Earnings per Share before non-recurring costs of 0.4p (2018: (1.7)p) with no non-recurring costs in 2019

Net cash at year end of £0.5 million (2018: £0.8 million)

 

Operational Highlights

New RMU agreements with German shopping centre groups

Successful introduction of Activate! concept in the UK

Revival of the German retail division

Hammerson and ASDA contract wins

Extension to NRIL contract

 

Chairman's Statement

 

Whilst this report and accounts cover the period ended 31 December 2019, it is the period since mid-March this year which has dominated events not just at your company but also the global economy. 

It is against this backdrop that we report on last year which had a number of positive outcomes including a return to profitability, contract renewals in the UK and significant progress in Germany.

During the first half of 2020 management's focus has been on ensuring the business survives the impact of COVID-19 and the lockdown measures which have been imposed by government to control the pandemic.  As we now begin to emerge from these it is unclear how quickly and fully the economies of the UK and Germany will recover.  Priorities have therefore been on cost control, cash management and ensuring the business is in the strongest possible shape for the uncertain future we face.  Matthew Bending's CEO report covers these in more detail, but accessing additional financing through CBILS and making use of government furloughing schemes to strengthen the Group's financial position, keeping in close contact with property groups and customers and identifying innovative new products have all been successfully progressed.

During these challenging times, it is my pleasure to welcome two new Directors to the Board. Andrew Keiller has been a key member of the management team since joining SpaceandPeople in 2012 and his appointment to the Board as Client Services Director brings important insight into our client relationships. Graham Bird has known SpaceandPeople for some time through his involvement with Gresham House and is a valuable addition to the non-executive side of the Board.

There have also been a number of hard decisions which we have had to make, including not proposing a dividend for the year in order to preserve the Group's cash.

On behalf of my board colleagues, I would like to thank all staff and management across the business for their hard work in 2019 and the challenging months of 2020 to date.  It is much appreciated.

 

George Watt

Chairman

26 June 2020

Chief Executive Officer's Review

 

Introduction

As you might expect, I would like to start my review with a summary of the risks that coronavirus poses to the business,  the actions we are taking to mitigate the material impact that is currently being felt, and the ongoing risks.

It is very clear that the pandemic has had a profound impact on the economies of the countries in which we operate and that our major clients in both retail and transport have been at the centre of it.

Our revenue streams stopped completely and abruptly in the UK, Germany and India during March 2020. As I write this, the majority of UK and German shopping centres are reopening, but with lower footfall at present. This has led to significant issues in our business that will continue for some time to come.

Decreased footfall and the need for social distancing restrict the appeal of promotions and the availability of space and of people in both Shopping Centres and Railway Stations. As a result, the business has prepared for a substantive downturn in sales for the duration of the pandemic and beyond by conserving cash, reducing overheads, cancelling discretionary expenditure and obtaining additional funding.

At this time it is extremely difficult to calculate the medium to long term effects that this virus will have on our business, as both the retail and transport sectors are not running normally in any sense at the moment.

Our current thoughts are that:

·      any return to shopping malls must be safe and work practices reflect new health and safety demands;

·      the availability of venues and space within those venues will be constrained and regionally variable to allow normal operations;

·      retail operators will be the first to want to return to venues and will accommodate all necessary working practices in order to do so; and

·      Brand Experience and customer engagement activities will be slower to return to normal as the effects of social distancing can impact on the effectiveness of these activities.

As a business, we took immediate action to respond to the economic risks arising from the UK and Germany wide lockdowns. Initially, all staff were quickly mobilised to work remotely from home, we cancelled the proposed dividend and immediately produced reforecasts which enabled us to apply swiftly for the Government-backed Coronavirus Business Interruption Loan Scheme ("CBILS"), where we successfully accessed a £1 million five-year-term loan through this scheme in addition to our existing facilities. Inclusive of the CBILS loan, the group has access to £2.25 million of bank facilities, through a combination of committed facilities and overdraft.  As at 31 May 2020, £1.75 million was drawn and the Group had £1.54 million of cash.

We are also now making use of the Job Retention Scheme ("JRS") to furlough the majority of our UK staff and we are using the equivalent German scheme to furlough staff there. As we come out of this period, we will take further appropriate measures to ensure that the running costs of the business are appropriate for the scale of the business going forward.

We are clear, however, about our strategy; we have to ensure that we remain relevant to landlords and space users. We are adapting quickly and effectively as circumstances develop and from the beginning of the pandemic, we identified three key stages to survival.

Pause - Emerge - Thrive

Pause

The first stage was to ensure that the business took all possible measures to operate efficiently and conserve cash during the pandemic while striving to meet our commitments to venues, promoters, retailers and all other stakeholders in the business.

This has been achieved through a number of actions. We have taken advantage of state assistance wherever possible, including salary support schemes, the business interruption loan scheme and tax authority payment holidays. We have cancelled all discretionary expenditure including non-essential capital purchases and have sought to reduce overheads wherever possible, for example, by reducing office lease costs and suspending minimum income guarantee payments. We have also cancelled the proposed final dividend for 2019 which alone has allowed us to retain almost £150k of cash. It was very encouraging through this initial phase that we retained the support of our key clients, promoters, retailers and lenders and we are grateful to them for this.

Emerge

The main thought behind the Emerge phase of our strategy is that, as we begin to come out of lockdown, the immediate needs of our business as well as the needs of our partners will be very different to the way we normally operate. Cashflow will be a constraint for a number of parties and the continued need for social distancing and enhanced health and safety requirements will change the way we all operate. The availability of space within venues will also be curtailed and altered.

A key part of the Emerge phase of our strategy is a concept called "Revive". Clients have experienced an increase in empty shop units in their venues and we have been actively engaging with them to help fill these empty units with operators who either cannot currently use the mall space due to the need for social distancing, are looking for a route to sell significant levels of stock that has built up during the lockdown period, or are looking to move into a new business model (mainly retailers looking to take advantage of the rates holiday and turnover only deals). This is intended to be a temporary solution until venues and operators get back on track and it has been well received by property clients and a new breed of short term retailers who are looking to trial conventional brick and mortar shopping locations, maybe for the first time.  We believe that landlord/retailer relationship have to evolve, as old retailers disappear and new retailers decide whether to go online or take units in malls. I am confident that traditional shopping can thrive again, but finding innovative retailers requires an approach that is not delivered by traditional leasing agents.

From a standing start, we have brought over 50 new retailers to the attention of UK landlords, offering attractive models for empty units on short term leases. These new retailers will have an opportunity to become established whilst being helped by the non-domestic rates assistance into 2021. This is a creative and dynamic concept and shows that SpaceandPeople are yet again at the forefront of delivering innovation to UK malls. This will also be a key component of the Thrive phase of our strategy.

Thrive

Through cost reductions, amended business practices, enhanced liquidity, IT improvements and innovation we have already put in place a number of the key components of our Thrive strategy. Once we are more aware of the commercial landscape and the needs and aspirations of our clients and promoters, we know that we will be able to adapt in a rapid and flexible way in order to assist and get business booming again.

Despite the difficulties of this period, it has inspired us to innovate, remodel our business and prepare to take advantage of the opportunities it presents.

2019 Performance

For us, 2019 was a year  in which considerable effort was required to maintain performance and I am pleased to report that we returned to profitability during the year. Although overall gross revenue decreased from £18.8 million to £17.3 million, net revenue showed a more modest decline from £8.1 million to £7.7 million. Despite this, planned cost savings enabled us to return to an operating profit of £0.1 million, compared with a £0.05 million operating loss (before non-recurring items) in 2018. The environment in UK shopping centres was challenging with a macro backdrop of multiple retailer failures and commercial property increasingly under a negative spotlight, exacerbated by considerable uncertainty from Brexit. However, despite this landscape we managed to move to profitability and had some notable highlights.

I was delighted that Hammerson decided to re-join our service during 2019 and this will allow us to generate additional revenue in both our UK promotions and retail divisions. It was also great to have LandSec and M&G Investments, two major clients, extend long standing contracts. We also added notable individual venues such as Victoria Place Shopping Centre in London and delivered new concepts such as Activate!

Activate!

The Activate! programme developed as a result of one of our major clients wanting more enlivenment than was commercially available and to be a closer partner to educational, artistic and voluntary organisations. They challenged us to make these organisations aware of the opportunities that are available and to get them excited about how the correct high footfall space could enable them to engage with the public in a way that was totally new for them. We have engaged with museums, art galleries, orchestras and local education institutions amongst others, to introduce them to using previously prohibitively expensive promotion space as fantastic recruiting grounds for their engagement programmes. We achieved nearly 30 Activate! campaigns in 2019 from a standing start with notable users such as the Imperial War Museum, South Bank, Natural History Museum, and interactive life drawing classes. It has been tremendously well received by clients, promoters and the public alike. We see the expansion of this concept as being an essential part of rejuvenating the shopping mall offer in the future and we currently have a significant pipeline of interested users when malls and stations return to normal operations.

UK Promotions

The UK promotional division delivered Brand Experience and national retail revenues that were similar or slightly improved compared with 2018, which is commendable given the challenges the UK shopping centres industry faced during the year. It is interesting to note that the number of Brand Experience bookings transacted during 2019 increased dramatically compared with 2018, with one client seeing the number of days utilised increase by 20%. However, the average value of each booking was lower than in the past and, as a result, revenue remained fairly static.

UK Retail

Within the UK retail division, the average number of Mobile Promotions Kiosks reduced from 60 in 2018 to 54 during 2019. This was a result of the sale of some venues to landlords with whom we do not currently trade. The Retail Merchandising Unit business also suffered as, in the run up to Christmas, there was a lack of demand in some of the locations in which we had units available. These issues affected revenue which decreased from £3.1 million in 2018 to £2.8 million. At present, it is difficult to predict what demand will be in 2020 once venues are fully reopened, but we are working hard to rebuild this business.

Germany

In Germany we saw the expected cessation of almost all promotional revenue as we continued our focus on building the retail business. 2019 began with the final removal of a number of RMUs from ECE malls after the Christmas trading period. During the first half of 2019, discussions were held with ECE and other venue owners and it was anticipated that the number of RMUs in operation would begin to recover over the summer period. Negotiations took longer than anticipated and the roll-out of additional units did not commence until the final quarter of the year. This renewed approach to RMUs from our key German clients led to the number of units operating in November and December 2019 increasing to 120 and on more attractive terms than before. We have a strong pipeline of excellent locations and new retailers for 2020 and beyond who are keen to start trading when possible.

We had anticipated that in 2020, the German retail division would achieve an average of between 80 and 100 RMUs in operation with higher revenue and lower rents generating improved profits. Although this is not now possible, the good news is that footfall in German malls has already returned to around 80% of normal and we currently have 69 units deployed.

Outlook

As a result of the actions we have taken already, we are able to plan for the future rather than just firefighting current problems.

We envisage that pop up, kiosk and Revive retail in the UK and Germany will be prime income drivers seeing the majority of activity coming back in by the end of the year. Brand Experience, local business and MPK bookings are likely to be slower and we do not anticipate them returning to normal levels until during 2021.

We are fortunate that we have an established pipeline of concepts such as Software as a Service (SaaS) that we will roll out this year. Our SaaS system has already been developed and I am pleased to say we are actively engaged with one of our major clients to roll this out during 2020.  Our SaaS product is an asset management tool designed to allow users to manage activity throughout their venues in real time. It will link marketing, commercialisation and retail asset management simultaneously, improving communication and management oversight and providing security of operations. We believe that this product is unique in our market and we see it as a positive opportunity to monetise our knowledge and experience beyond being viewed as being rewarded solely for delivering sales.

The return to work will be a stop-start process in the UK in particular and the physical safety of staff and customers will be paramount. We would not be discussing the future with any positivity if it were not for the efforts of the staff and management of SpaceandPeople, our clients, operators and countless other people working selflessly to get through this period. I am grateful for all their efforts and the help that they have provided.

 

Matthew Bending

Chief Executive Officer

26 June 2020

 

 

Operating and Financial Review

 

The principal focus of the Group during 2019 was to continue the concentration of efforts on our core business units of promotions, Retail Merchandising Units ("RMUs") and Mobile Promotions Kiosks ("MPKs") in both the UK and Germany.

 

Group revenue was 4% lower than in the previous year, due in large part to a 20% reduction in German retail revenue as the Group adopted a new strategic approach for this division, which was partially offset by a 5% increase in UK promotional revenue.

 

Despite the decrease in net revenue, the Group delivered an operating profit of £0.1 million compared with an operating loss before non-recurring costs of £0.05 million in 2018. This was as a result of an 8% reduction in administration expenses compared with 2018.

 

UK Retail revenue fell by 7%, as a result of a 22% drop in the average number of RMUs and MPKs in operation compared with 2018. This was anticipated in the main as specific contracts came to an end.

 

Revenue

 

Revenue generated in 2019 was £7.7 million, which was £0.3 million (4%) lower than in the previous year.

 

UK promotional revenue increased by 5% compared with 2018, to £3.5 million. While trading in the usual revenue streams was broadly comparable with 2018, the increase resulted from new revenue streams such as Activate! and consultancy fees and the exceptionally warm summer of 2018, coinciding with the football World Cup not being repeated during 2019.

 

UK retail revenue fell by 7% to £2.8 million in 2018, with RMU revenue down 20% and MPK revenue down 4%. The average number of RMUs in operation in the UK fell by 32%, however, average income per RMU increased significantly as a result of both increased rent in RMUs that remained in situ and significantly higher than average rents on new RMU locations. The reduction of 10% in MPK numbers was partially offset by a 5% increase in average rental values.

 

German promotional revenue decreased by 15% compared with the previous year to £0.3 million as a result of a number of long-term bookings coming to an end. The remainder of these bookings will come to an end during 2020 and it is not anticipated that this division will generate any significant new business for the foreseeable future.

 

Revenue in the German retail division fell by 20% as a result of a 37% drop in the average number of RMUs in operation during the year to 53 RMUs (2018: 84 RMUs). This was due to the ending of the previous agreement with ECE in January 2019, which was not renewed until late 2019, leading to a low number of RMUs being in use for the majority of the year. The number of RMUs in operation at the end of 2019 had risen again to 80 units.

 

Administrative Expenses

 

Due to a continued focus to drive efficiency in the business, administrative expenses reduced again in 2019. The 8% reduction of £0.4 million followed a £0.3 million (5%) reduction in the previous year. With the termination of significant office lease costs occurring in 2020, we will look to continue this trend.

 

The average number of people employed in the business fell by 12 to 80 in 2019. This was primarily due to a reduction in the number of telesales and commercial staff from 52 to 41, following the wind-down of the German promotional business and a decrease in the number of UK commercial staff.

 

Profit

 

The operating profit of £0.1 million represented an improvement of £0.4 million on the previous year (2018: loss of £0.3 million).

 

Basic Earnings per Share ("EPS") increased to 0.4p (2018: negative 1.7p). Fully diluted EPS increased to 0.3p (2018: negative 1.5p). Basic EPS is calculated as profit after tax and before non-recurring costs attributable to the owners of the Company divided by the weighted average number of shares in issue during the year which was 19,519,563 (2018: 19,519,563). Fully diluted EPS also takes into account the number of shares that would be issued on the exercise of outstanding share options. The weighted average number of shares used to calculate the diluted EPS was 20,990,883 (2018: 21,548,024).

 

Cash Flow

 

The Group cash inflow from operating activities was £0.2 million (2018: outflow of £1.4 million). This was due to EBITDA being  £0.6 million. During the year £0.6 million was added to non-current assets as the addition of £0.6 million of right of use leased assets was capitalised on the balance sheet in accordance with IFRS 16. A dividend of £0.1 million was also paid during the year. As at the end of 2019, the Group had drawn down £0.75 million of its banking facility resulting in the gross cash position being £0.4 million higher at the end of 2019 than 2018, and the net cash position being £0.3 million lower.

 

Prior Period Adjustment

 

In January 2020, management discovered that there had been an error in the collection of revenue receivable by the Company in relation to one client. This error related to both the year to 31 December 2019 and the earlier period. As a result of this, a correction has been made to the comparative year revenue, accruals and corporation tax charge, with revenue increasing by £118k and a corporation tax charge of £22k. The client has subsequently cash settled the full amount.

 

COVID-19

 

On 19 March 2020, the Group announced its previously proposed final dividend of 0.75p per share at the upcoming Annual General Meeting was being removed as a result of actions being taken to protect the business and preserve cash as a result of COVID-19.

 

In addition to the cancellation of the dividend, the Group has taken advantage of the JRS in the UK and the equivalent scheme in Germany in order to furlough the majority of staff during this period. Actions were also carried out with our clients, retailers and promoters to suspend payments where appropriate and to support each other through this period in as best a manner as possible. The Group has also accessed a £1.0 million five-year term loan through CBILS which provides significant headroom and certainty for the business going forward.

 

Gregor Dunlay

Chief Financial Officer

26 June 2020

 

 

Consolidated Statement of Comprehensive Income

For the 12 months ended 31 December 2019

               

Notes

 

12 months to

 

12 months to



31 December '19

31 December '18

as restated



£'000

£'000





Revenue

4

7,735

8,057





Cost of sales

4

(2,865)

(2,886)



 

 

Gross profit


4,870

5,171



 

 

Administration expenses


(4,955)

(5,360)

Other operating income


175

136





Operating profit/(loss) before non-recurring costs


90

(53)





Non-recurring costs

8

-

(244)





Operating profit/(loss)


90

(297)





Finance income


4

7

Finance costs

9

(23)

(7)





Profit/(loss) before taxation


71

(297)





Taxation

10

(21)

(304)

 

Profit/(loss) after taxation


50

(601)





Other comprehensive income

Foreign exchange differences on

translation of foreign operations


 

(21)

 

(5)





Total comprehensive income for the period


29

(606)

 









Profit/(loss) for the year attributable to:








Owners of the Company


68

(578)

Non-controlling interests


(18)

(23)



50

(601)

Total comprehensive income for the




period attributable to:








Owners of the Company


47

(583)

Non-controlling interests


(18)

(23)

Total comprehensive income for the


29

(606)

Period




 

Earnings/(loss) per share

 

25



Basic - Before non-recurring costs


0.4p

(1.7)p

Basic - After non-recurring costs


0.4p

(3.0)p

Diluted - Before non-recurring costs


0.3p

(1.5)p

Diluted - After non-recurring costs


0.3p

(2.7)p

 

Consolidated Statement of Financial Position

At 31 December 2019


Notes

31 December '19

31 December '18

as restated



£'000

£'000

Assets




Non-current assets:




Goodwill

13

7,981

7,981

Other intangible assets

14

-

4

Property, plant & equipment

15

894

849



8,875

8,834

Current assets:




Trade & other receivables

17

3,428

3,553

Cash & cash equivalents

18

1,227

843



4,655

4,396





Total assets


13,530

13,230





Liabilities




Current liabilities:




Trade & other payables

19

3,259

3,559

Current tax payable

19

82

219



3,341

3,778

Non-current liabilities:




Deferred tax liabilities

16

(3)

101

Lease liabilities

21

160

-

Other borrowings

20

750

-



907

101





Total liabilities


4,248

3,879

 

 




Net assets


9,282

9,351





Equity




Share capital

23

195

195

Share premium


4,868

4,868

Special reserve


233

233

Retained earnings


3,771

3,822





Equity attributable to owners of the


9,067

9,118

Company




Non-controlling interest


215

233

Total equity


9,282

9,351

 

The financial statements were approved by the Board of Directors and authorised for issue on 26 June 2020.

 

Signed on behalf of the Board of Directors by:

 

M J Bending - Director

 

Consolidated Statement of Cash Flows

For the 12 months ended 31 December 2019


Notes

12 months to

12 months to



31 December '19

31 December '18

as restated



£'000

£'000

Cash flows from operating activities




Cash generated from operations


252

(1,367)

Interest received

9

4

7

Interest paid

9

(23)

(7)

Taxation


(262)

(51)

Net cash outflow from operating


(29)

(1,418)

activities








Cash flows from investing activities




Purchase of intangible assets

14

(1)

-

Purchase of property, plant & equipment

15

(47)

(107)

Net cash outflow from investing


(48)

(107)

activities








Cash flows from financing activities




Bank facility drawn 


750

-

Payment of finance lease obligations


(191)

-

Dividends paid

12

(98)

(293)

Net cash inflow/(outflow) from


461

(293)

financing activities








Increase/(decrease) in cash and cash equivalents


384

(1,818)

Cash and cash equivalents at beginning of


843

2,661

Period




Cash and cash equivalents at end of

18

1,227

843

period




 

 

Reconciliation of operating profit to net




cash flow from operating activities




Operating profit/(loss)


90

(297)

Write off of goodwill

13

-

244

Amortisation of intangible assets

14

5

11

Depreciation of property, plant &

15

551

405

equipment




Effect of foreign exchange rate moves


(13)

(5)

(Increase) / decrease in receivables


125

(304)

Decrease in payables


(506)

(1,421)

Cash inflow/(outflow) from operating activities


252

(1,367)

 

 

Consolidated Statement of Changes in Equity

For the 12 months ended 31 December 2019


Share


Share


Special 


Retained


Non-


Total


capital


premium


reserve


Earnings


controlling


equity


£'000


£'000


£'000


£'000


interest


£'000










£'000















At 31 December 2017

195


4,868


233


4,698


256


10,250













Comprehensive












income:












Foreign currency












translation

-


-


-


(5)


-


(5)

Loss for the period as restated *

-


-


-


(578)


(23)


(601)

Total comprehensive

-


-


-


(583)


(23)


(606)

income
























Transactions with












owners:












Dividends paid

-


-


-


(293)


-


(293)

Total transactions with

-


-


-


(293)


-


(293)

owners
























As at 31 December 2018 as restated *

 

 

195


 

 

4,868


 

 

233


 

 

3,822


 

 

233


 

 

9,351













As at 31 December 2018 as originally stated

 

195


 

4,868


 

233


 

3,726


 

233


 

9,255













Prior period adjustment

-


-


-


96


-


96













Restated total equity as at 31 December 2018

 

195


 

4,868


 

233

 

 

 

3,822


 

233


 

9,351

 

Comprehensive












income:












Foreign currency












translation

-


-


-


(21)


-


(21)

Profit/(loss) for the period

-


-


-


68


(18)


50

Total comprehensive

-


-


-


47


(18)


29

income
























Transactions with












owners:












Dividends paid

-


-


-


(98)


-


(98)

Total transactions with

-


-


-


(98)


-


(98)

owners
























At 31 December 2019

195


4,868


233


3,771


215


9,282

               

*              See note 7 for details regarding the restatement as the result of an error.                                                                                                                            

Notes to the Financial Statements

For the 12 months ended 31 December 2019

 

1.         General information

 

SpaceandPeople plc is a public limited company incorporated and domiciled in Scotland (registered number SC212277) which is listed on AIM (dealing code SAL).

 

2.         Basis of preparation

 

The Group's financial statements for the period ended 31 December 2019 and for the comparative period ended 31 December 2018 have been prepared on a going concern basis under the historical cost convention in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and International Financial Reporting Interpretations Committee (IFRIC) interpretations, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

Going Concern

 

The Directors are required to prepare the statutory financial statements on the going concern basis unless it is inappropriate to presume that the group will continue in business. In satisfaction of this responsibility the Directors have considered the Group 's ability to meet its liabilities as they fall due.

 

The Group meets its day to day cash requirements through working capital management and the use of existing bank overdraft and revolving credit facilities. Management information tools including budgets and cash flow forecasts are used to monitor and manage current and future liquidity.

 

The Group also pays special attention to the recent COVID-19 outbreak and the associated impact on the business, which is detailed within the Chief Executive Officer's Review. This includes:

-       The availability of venues and space to sell on behalf of our customers

-       Interruption to operations due to an absence of staff for a period due to either contracting the virus or measures taken to contain an outbreak in our offices;

-       A fall in revenue and decreased cash flow due to lower general economic activity throughout the UK and Germany.

 

Although it is not possible to reliably estimate the length or severity of the outbreak, at the date of signing, the restrictions on mobility are easing and non-essential shops and retail areas are starting to re-open. However, the Group acknowledges this could change suddenly depending on how the situation evolves and whether there are interruptions to business or supply as detailed above.

The current and future financial position of the Group, its cash flows and liquidity position have been reviewed by the Directors. They have taken a very prudent view on the likely gradual recovery in each of the Group's divisions and have stress tested these assumptions to ensure that cash flows and liquidity are sufficiently robust to allow the Group to continue to trade during  this period.

The Group is managing its cash flows prudently through a number of methods, including:

·      The Job Retention Scheme ("JRS") in the UK and the German equivalent for staff based there;

·      Implementing planned and additional overhead reductions as timeously as possible;

·      Accessing a £1.0 million term loan through the CBIL scheme;

·      Agreeing the deferral of VAT and PAYE with HMRC;

·      Suspension of minimum income guarantees with landlords;

·      Cancellation of the proposed final dividend; and

·      Halting planned capital expenditure.

As a result of reduced trading following the COVID-19 outbreak the Group's bankers agreed to waive existing lending covenants for quarters 2 and 3. New covenants are currently being negotiated with the bank and while at the date of signing these have still to be finalized, the Group's bankers have expressed their desire to continue to support the business and are working towards agreeing appropriate covenants that will reflect the new trading environment anticipated after COVID-19.

 

The Directors are confident that the additional funding facilities and support from our bankers will provide sufficient headroom to meet the forecast cash requirements, having considered any additional requirements as a result of trading being lower than the revised forecasts and further mitigation that they could put in place to counter this (specifically in relation to the COVID-19 pandemic). The Group's current and long-term forecast outlook has provided further assurance to the Directors regarding its financial position.

 

As such, the Directors consider that it is appropriate to prepare the financial statements on the going concern basis.

 

Accounting developments

 

New and revised IFRSs applied

 

Title

 

Implementation

Effect on Group

IFRS 15 - "Revenue from Contracts with Customers"

Annual periods beginning on or after 1 January 2019

 

There is no effect on the Group financial statements as a result of the implementation of this standard.

 

IFRS 16 - "Leases"

Annual periods beginning on or after 1 January 2019

The new standard requires capitalisation of all leasing agreements with durations exceeding 12 months, whereas the previous regulations only required capitalisation of finance leases. The right-of-use asset and liability to be recognised for each leasing agreement is the present value of the lease payments.

The Group has adopted IFRS 16 retrospectively from 1 January 2019 using the modified retrospective approach, as permitted under the specific transitional provisions in the standard.  As such, the comparative information presented for 2018 has not been restated. This is detailed in note 21.

 

The following amendments will be introduced in future periods

 

Title

 

Implementation

Effect on Group

Amendments to 'References to the Conceptual Framework in IFRS Standards'

Annual periods beginning on or after 1 January 2020

The Board does not anticipate any material impact on the financial statements.

Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)

Annual periods beginning on or after 1 January 2020

The Board does not anticipate any impact on the financial statements.

Definition of a Business (Amendments to IFRS 3)

Annual periods beginning on or after 1 January 2020

The Board does not anticipate any impact on the financial statements.

Definition of Material (Amendments to IAS 1 and IAS 8)

Annual periods beginning on or after 1 January 2020

The Board does not anticipate any impact on the financial statements.

 

Management anticipates that the standards and interpretations in issue, but not yet effective will be adopted in the financial statements when they become effective and currently foresee no material impact by the adoptions on the financial statements of the Group in the period of initial application. However, this will be assessed further upon implementation.

 

3.          Accounting policies

 

Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards.

Basis of consolidation     

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the period are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.

For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss of goodwill is recognised directly in the consolidated statement of comprehensive income. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

The Group's policy for goodwill arising on the acquisition of an associate is described below.

Investments in subsidiaries

The parent Company's investments in subsidiary undertakings are included in the Company statement of financial position at cost, less provision for any impairment in value.

Revenue

 

Revenue is measured at the fair value of consideration received or receivable. Revenue is shown net of value-added tax, rebates and discounts and after eliminating intergroup sales. Revenue is recognised when the amount of revenue can be measured reliably, it is probable that future economic benefits will flow to the Group and when any specific delivery criteria have been met.

 

Promotion divisions

Revenue in the UK and German promotion divisions is recognised at the point at which bookings, including future dated bookings, are agreed by all parties. This policy is adopted as our contractual right to commission income is crystallised at this point.

 

Retail divisions

Revenue in the UK and German retail divisions is recognised in the month during which the booking takes place. This is due to the requirement to match the revenue stream with the rental cost incurred with the landlord.

 

Commission

Revenue from commission receivable while acting as agent is recognised when the following conditions are satisfied;

-       Contract is agreed with promoter / merchant

-       Venue acceptance of contract

-       Invoice issued and no further input anticipated

 

Acting as principal

Revenue from agreements where we act as principal i.e. renting space from venues and reselling to promoters and operators, is recognised as gross revenue receivable by us, with the corresponding amount payable to the venue owner being recognised in cost of sales.

 

 

Leasing income

Revenue from leasing activities is recognised on a straight-line basis over the term of the lease.

 

Licence fees

Licence fee revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement. 

 

Interest income

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the asset's net carrying amount on initial recognition.

Leasing

IFRS 16 requires capitalisation of all leasing agreements with duration exceeding 12 months, whereas the previous regulations only required capitalisation of finance leases. The right-of-use asset and liability to be recognised for each leasing agreement is the present value of the lease payments.

The Group has adopted IFRS 16 retrospectively from 1 January 2019 using the modified retrospective approach, as permitted under the specific transitional provisions in the standard.  As such, the comparative information presented for 2018 has not been restated. 

The Group applied the following practical expedients as permitted by the standard on transition:

·      non recognition of right of use assets and liabilities for leases of low value or for which the lease term ends within 12 months of the date of transition

·      the use of a single discount rate to a portfolio of leases with reasonably similar characteristics

·      the exclusion of initial direct costs for the measurement of the right of use asset at the date of initial application

·      the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

On transition the Group recognised lease liabilities in relation to leases classified as operating leases under the principles of IAS 17 Leases.  These were measured at the present value of the remaining lease payments, discounted using the Group's incremental borrowing rate as at 1 January 2019.

The associated right of use assets were measured at the amount equal to the lease liability, adjusted for any prepaid or accrued lease payments relating to that lease recognised on balance sheet as at 31 December 2018.  There were no onerous lease contracts that required an adjustment to the right of use assets at the date of initial application.

At inception, the Group assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the Group recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment.

The right-of-use asset is initially measured at cost, which comprises the present value of minimum lease payments determined at the inception of the lease.  The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the Group is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.

The lease liability is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the Group's estimate of the amount expected to be payable under a residual value guarantee; or the Group's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.

The Group has made judgements in adopting IFRS 16 such as identifying contracts in scope for IFRS 16, determining the interest rate used for the discounting of future cashflows, and the determining lease terms where the lease has extension or termination options.

Property, plant & equipment

 

Depreciation is provided at the annual rates below in order to write off each asset over its estimated useful life.

 

Plant & equipment

12.5% of cost

Fixtures & fittings

-

25% of cost

Computer equipment

Computer software

-

-

25% of cost

33% of cost

 

Property, plant & equipment is stated at cost less accumulated depreciation to date.

 

Intangible assets

 

Website development costs

The Group capitalises all costs directly attributable to further developing its websites, while costs which relate to on-going maintenance are expensed as they arise. The capitalised costs are depreciated over three years.

 

Patents and trademarks

The costs of obtaining patents and trademarks are capitalised and written off over the economic life of the asset acquired.

 

Impairment of non-current assets

The need for any non-current asset impairment is assessed by comparison of the carrying value of the asset against the higher of realisable value and the value in use or, in the case of intangible assets, the anticipated future cash flows arising from the asset.

 

Taxation

 

The tax expense represents the sum of tax currently payable and deferred tax. Tax currently payable is based on the taxable profit for the period. The Group's liability for current tax is calculated using rates that have been enacted or substantially enacted at the balance sheet date.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in computation of taxable profits and is accounted for using the liability method. Deferred tax liabilities are recognised for all temporary timing differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition, other than in a business combination, of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax laws and rates that have been enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income.

Foreign exchange

 

Items included in the Group's financial statements are measured using Pounds Sterling, which is the currency of the primary economic environment in which the Group operates and is also the Group's presentational currency.

 

Transactions denominated in foreign currencies are translated into Sterling at the rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rates at that date. These translation differences are dealt with in the profit and loss account.

 

The income and expenditure of overseas operations are translated at the average rates of exchange during the period. Monetary items on the balance sheet are translated into Sterling at the rate of exchange ruling on the balance sheet date and fixed assets at historical rates. Exchange difference arising are treated as a movement in reserves.

 

Financial instruments

 

Financial assets and liabilities are recognised in the Group's balance sheet when it becomes a party to the contractual provisions of the instrument.

 

Trade and other receivables

 

Trade and other receivables are carried at original invoice value less an allowance for any uncollectable amounts. An allowance for bad debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off in the income statement when identified.

 

Cash and cash equivalents

 

Cash and cash equivalents are carried in the balance sheet at cost and comprise cash in hand, cash at bank and deposits with banks.

 

Trade and other payables

 

Trade and other payables are carried at amortised costs and represent liabilities for goods or services provided to the Group prior to the period end that are unpaid and arise when the Group becomes obliged to make future payments in respect of these goods and services.

 

Equity instruments

 

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

 

Share based payments

 

The Group operates a number of equity settled share-based payment schemes under which share options are issued to certain employees. The fair value determined at the grant date of the equity settled share-based payment, where material, is expensed on a straight-line basis over the vesting period. For schemes with only market-based performance conditions, those conditions are taken into account in arriving at the fair value at grant date.

 

Pensions

 

The Group pays contributions to the personal pension schemes of certain employees. Contributions are charged to the income statement in the period in which they fall due.

 

Critical accounting judgements and estimates

 

The preparation of financial statements in conformity with IFRS requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenditure during the period. Although these estimates are based on management's best knowledge of current events and actions, actual results may differ from those estimates. IFRS also requires management to exercise its judgement in the process of applying the Group's accounting policies.

 

The areas where significant judgements and estimates have been made in the preparation of these financial statements are the useful lives and impairment of non-current and intangible assets, impairment of the value of investment in associates and taxation. Explanations of the methodology and the resultant assumptions are detailed in the relevant accounting policies above and the respective notes to the financial statements.

 

Borrowing costs

 

Borrowing costs are amortised over the duration of the loan and recognised throughout the term of the loan.

 

 

4.          Segmental reporting

 

The Group maintains its head office in Glasgow and a subsidiary office in Hamburg, Germany. These are reported separately. In addition, the retail business, now trading as POP Retail, has an office in London and a subsidiary in Germany. The Group has determined that these are the principal operating segments as the performance of these segments is monitored separately and reviewed by the Board.

 

The following tables present revenues, results and asset and liability information regarding the Group's two core business segments - Promotional Sales and Retail, split by geographic area, after licence fees and management charges made between Group companies. The Other segment incorporates SpaceandPeople India.

 

Segment revenues and

 

Promotion

 

Promotion

 

Retail

 

Retail

 

Head

 

Other

 

Group

Results

UK

Germany

UK

Germany

Office



for 12 months to

£'000

£'000

£'000

£'000

£'000

£'000

£'000

31 December '19
















Revenue

3,519

312

2,839

993

-

72

7,735









Cost of sales

-

-

(2,160)

(705)

-

-

(2,865)

Administrative expenses

(2,436)

(303)

(272)

(986)

(841)

(117)

(4,955)

Other revenue

-

74

-

101

-

-

175









Segment operating profit/(loss)

1,083

83

407

(597)

(841)

(45)

90

















Finance income

-

-

-

-

-

4

4

Finance costs

(23)

-

-

-

-

-

(23)









Segment profit/(loss)

1,060

83

407

(597)

(841)

(41)

71

before taxation








 

Segment assets and

Promotion

Promotion

Retail

Retail

Other

Group

liabilities

UK

Germany

UK

Germany



as at 31 December '19

£'000

£'000

£'000

£'000

£'000

£'000








Total segment assets

7,225

285

4,714

738

568

13,530








Total segment liabilities

(2,897)

(72)

(764)

(489)

(26)

(4,248)








Total net assets

4,328

213

3,950

249

542

9,282

 

 

Segment revenues and results for

Promotion

Promotion

Retail

Retail

Head

Other

Group

12 months to

UK

Germany

UK

Germany

Office



31 December '18

£'000

£'000

£'000

£'000

£'000

£'000

£'000

as restated
















Revenue

3,356

369

3,062

1,236

-

34

8,057









Cost of sales

-

-

(2,252)

(634)

-

-

(2,886)

Administrative expenses

(2,609)

(582)

(316)

(934)

(830)

(89)

(5,360)

Other revenue

-

60

-

76

-

-

136

Non-recurring costs

(244)

-

-

-

-

-

(244)









Segment operating profit/(loss)

503

(153)

494

(256)

(830)

(55)

(297)

















Finance income

-

-

-

-

-

7

7

Finance costs

(7)

-

-

-

-

-

(7)









Segment profit/(loss)

496

(153)

494

(256)

(830)

(48)

(297)

before taxation








 

Segment assets and

Promotion

Promotion

Retail

Retail

Other

Group

liabilities

UK

Germany

UK

Germany



as at 31 December '18

as restated

£'000

£'000

£'000

£'000

£'000

£'000








Total segment assets

6,819

469

4,676

599

667

13,230








Total segment liabilities

(1,968)

(495)

(1,051)

(316)

(49)

(3,879)








Total net assets

4,851

(26)

3,625

283

618

9,351

 

 5.        Operating profit/(loss)

The operating profit/(loss) is stated after charging:


12 months to

12 months to


December '19

December '18


£'000

£'000




Motor vehicle leasing *

-

56

Property leases *

-

240

Amortisation of intangible assets

5

11

Depreciation of property, plant and equipment

350

405

Depreciation of right of use assets

201

-


556

712

Auditor's remuneration:



Fees payable for:



Audit of Company

23

25

Audit of subsidiary undertakings

17

19

Tax services

13

4

Other services

18

25


71

73




Directors' remuneration

525

532

 

*              2019 disclosed in note 21

 

 

6.         Staff costs

The average number of employees in the Group during the period was as follows:


12 months to

12 months to


December '19

December '18




Executive Directors

Non-executive Directors

3

2

3

3

Administration

27

27

Telesales

33

40

Commercial

8

12

Maintenance

7

7


80

92

 


12 months to

12 months to


December '19

December '18


£'000

£'000




Wages and salaries

2,960

3,212

Social Security costs

361

440

Pensions

75

208


3,396

3,860

 

Details of Directors' emoluments, including details of share option schemes, are given in the remuneration report on pages 22 to 23. These disclosures form part of the audited financial statements of the Group.

 

7.         Prior period adjustment

A prior period adjustment has been recorded to reflect the impact of revenue under recognised in the previous period as a result of a material error in the application of contract terms in the revenue calculation. The full amount of this revenue has been recovered.

As such an adjustment has been made to include the comparative years revenue, accruals and corporation tax. Revenue was increased by £118k with a corresponding tax effect of £22k giving a net impact of £96k in the prior period. In January 2020, management identified an error in the calculation of revenue receivable in respect of the year to 31 December 2019 and the earlier period. As such a correction has been made to the comparative year revenue, accruals and corporation tax. Revenue has increased by £118k with a corporation tax effect of £22k.

 

8.         Non-recurring costs

 

During the prior period, the Group took the decision to write off £244k, being the carrying value of the goodwill relating to SpaceandPeople India Pvt Ltd as the level of profitability in that company no longer supported the valuation.

 

9.         Finance income and costs


12 months to

12 months to


December '19

December '18


£'000

£'000

Finance income:



Interest receivable

4

7




Finance costs:



Interest payable

(23)

(7)

 

10.       Taxation


12 months to

12 months to


December '19

December '18

as restated


£'000

£'000




Current tax expense:



Current tax on profits for the year

130

106

Adjustment for under/(over) provision in prior periods

(4)

13

Total current tax

 

126

119

Foreign tax:



Current tax on foreign income for the period

46

-

Adjustment for under/(over) provision in prior periods

(47)

175

Total foreign tax

(1)

175




Deferred tax:



Charge in respect of temporary timing differences

Adjustment for under/(over) provision in prior periods

(19)

(85)

10

-

Total deferred tax

(104)

10




 

Income tax expense as reported in the Income Statement

 

21

 

304

 

 

The tax assessed for the period is lower than the standard rate of corporation tax in the UK. The differences are explained below:


12 months to

12 months to


December '19

December '18

as restated


£'000

£'000




Profit/(loss) on ordinary activities before tax

71

(297)

Profit on ordinary activities at the standard rate of corporation tax in



the UK of 19% (2018: 19%)                                                              



Jan - Dec 2018: 19%

-

(57)

                                                                Jan - Dec 2019: 19%

13

-

                                                               



Tax effect of:



-       Adjustment for (over)/under provision in prior periods

(136)

188

-       Disallowable items

-       Tax losses

5

139

173

-




Income tax expense as reported in the Income Statement

21

304

 

11.       Profit for the period

 

The Company has taken advantage of the exemption allowed under Section 408 of the Companies Act 2006 and has not presented its own Income Statement in these financial statements. The Group profit for the period includes a Company profit after tax and before dividends of £159k after the incorporation of all UK head office costs (2018 restated loss: £382k) which is dealt with in the financial statements of the parent Company.

 

12.       Dividends


12 months to

12 months to


December '19

December '18


£'000

£'000




Paid during the period

98

293

Recommended final dividend

-

98

 

Equity - The Directors do not recommend a final dividend for 2019 (2018: 0.50p).

 

13.       Goodwill

Cost

£'000



At 31 December 2017

8,225

Additions

-

At 31 December 2018

8,225

Additions

-

At 31 December 2019

8,225

 

Accumulated impairment losses


At 31 December 2017

-

Charge for the period

244

At 31 December 2018

244

Charge for the period

-

At 31 December 2019

244

 

Net book value


At 31 December 2017

8,225

At 31 December 2018

7,981

At 31 December 2019

7,981

 

 

Goodwill acquired in a business combination is allocated at acquisition to the cash-generating units (CGUs) that are expected to benefit from that business combination. The Directors consider that the businesses of the UK Retail sub group and SpaceandPeople India Pvt Limited are identifiable CGUs and the carrying amount of Goodwill is allocated against these CGUs. During 2018 it was decided that the value of the goodwill in SpaceandPeople India Pvt Limited of £244,000 should be impaired in full. Goodwill for the UK Retail sub group remains unchanged at £7,981,000.

 

The recoverable amount of the cash generating unit was determined based on value-in-use calculations, covering a detailed forecast, followed by an extrapolation of expected cash flows based on the targeted and expected growth rate over the next five years followed by a terminal factor determined by management.

 

The present value of the future cash flows is then calculated using a discount rate of 7.38%. This discount rates include appropriate adjustments to reflect, in the directors judgement, the market risk and specific risk of the GGU.

 

The growth rate utilised in calculation of the terminal factor is based on expected inflationary growth in the UK beyond the period of forecasting. The growth rate used was 1.5%.

 

Cash flow projections during the budget period are based on an average growth in EBITDA which the Directors consider to be conservative given the plans for the businesses and the potential increased returns particularly in relation to the pipeline of new business opportunities, offset by the short and medium term issues caused by COVID-19. The discount rates reflect appropriate adjustments relating to market risk and specific risk factors of each CGU.

 

The estimate of recoverable amount for the CGU is sensitive to the discount rate, the cash flow projections and the growth rate.

 

If the discount rate used is increased beyond 7.0%, for each further movement of 1% an impairment loss of £0.5 million would have to be recognised and written off against goodwill.

 

If the annual growth rate beyond 2021, used in the cash flow projection, is decreased below 3.5%, for each further movement of 1% an impairment loss of £0.2 million would have to be recognised and written off against goodwill.

 

14. Other intangible assets

 

 

Cost

Website

Product

Patents &

Total


development

development

trademarks



£'000

£'000

£'000

£'000






At 31 December 2017

284

137

115

536

Additions

-

-

-

-

At 31 December 2018

284

137

115

536

Additions

-

-

1

1

At 31 December 2019

284

137

116

537

 

 

Amortisation

Website

Product

Patents &

Total


Development

development

Trademarks



£'000

£'000

£'000

£'000






At 31 December 2017

284

137

100

521

Charge for the period

-

-

11

11

At 31 December 2018

284

137

111

532

Charge for the period

-

-

5

5

At 31 December 2019

284

137

116

537

 

 

Net book value

Website

Product

Patents &

Total


development

Development

Trademarks



£'000

£'000

£'000

£'000






At 31 December 2017

-

-

15

15

At 31 December 2018

-

-

4

4

At 31 December 2019

-

-

-

-

 

15.       Property, plant and equipment

The Group movement in property, plant & equipment assets was:

 

Cost

Plant & equipment

Fixture & fittings

Computer equipment

Right of use assets property

Right of use assets plant & equipment

Total


£'000

£'000

£'000

£'000

£'000

£'000








At 31 December 2017

3,048

277

674

-

-

3,999

Additions

6

9

92

-

-

107

At 31 December 2018

3,054

286

766

-

-

4,106

Additions on application of IFRS 16

 

-

 

-

 

-

 

243

 

85

 

328

Additions

-

4

43

177

52

276

Forex

(8)

-

-

-

-

(8)

At 31 December 2019

3,046

290

809

420

137

4,702

 

Depreciation

Plant & equipment

Fixture & fittings

Computer equipment

Right of use assets property

Right of use assets plant & equipment

Total


£'000

£'000

£'000

£'000

£'000

£'000








At 31 December 2017

2,061

253

538

-

-

2,852

Charge for the period

292

10

103

-

-

405

At 31 December 2018

2,353

263

641

-

-

3,257

Charge for the period

243

12

95

156

45

551

At 31 December 2019

2,596

275

736

156

45

3,808

 

Net book value

Plant & equipment

Fixture & fittings

Computer equipment

Right of use assets property

Right of use assets plant & equipment

Total


£'000

£'000

£'000

£'000

£'000

£'000








At 31 December 2017

987

24

136

-

-

1,147

At 31 December 2018

701

23

125

-

-

849

At 31 December 2019

450

15

73

264

92

894

 

The right of use lease liabilities are secured against the right of use assets.

 

16.       Deferred tax



31 December '19


31 December '18



£'000


£'000






Deferred tax liability:

Deferred tax liability to be recognised after more than 12 months

 

Deferred tax assets:

Deferred tax asset to be recognised after less than 12 months

 


 

 

44

 

 

 

(47)


 

 

101

 

 

 

-

Deferred tax (asset)/liability


(3)


101
















At 1 January 2019

Debit / (Credit) in respect of losses

Adjustment in respect of previous year

Charge in respect of temporary timing differences on property, plant and equipment


101

-

(85)

(19)


91

-

-

10

At 31 December 2019


(3)


101

 

 

17. Trade and other receivables

 



31 December '19


31 December '18



£'000


£'000






Trade debtors


2,840


2,700

Other debtors


339


476

Prepayments


249


377

Total


3,428


3,553

 

Amounts falling due after more than one year included above are:


417


412

 

 

The maximum exposure to credit risk at the balance sheet date is the carrying amount of receivables detailed above. The Group does not hold any collateral as security.

 

The Directors do not believe that there is a significant concentration of credit risk within the trade receivables balance. As of 31 December 2019, trade receivables of £1.2 million (2018: £0.9 million) were past due but not impaired.

 

The ageing of trade debtors:

 


Current


0 - 30 Days


31 - 60 Days


61 Days +


Total


£'000


£'000


£'000


£'000


£'000











31 December '19

1,640


487


227


486


2,840











31 December '18

1,754


359


177


410


2,700

 

 

18.       Cash and cash equivalents



31 December '19


31 December '18



£'000


£'000






Cash at bank and on hand


1,227


843



1,227


843

 

 

19.       Trade and other payables



31 December '19


31 December '18

as restated



£'000


£'000






Trade creditors


419


442

Other creditors

Lease liabilities


1,391

206


1,285

-

Social Security and other taxes


301


240

Accrued expenses


657


1,225

Deferred income


285


367

Trade and other payables


3,259


3,559






Corporation tax


82


219

Total


3,341


3,778

 

All trade and other payables are short term. The carrying values of trade and other payables are considered to be a reasonable approximation of fair value.

 

20.       Other borrowings



31 December '19


31 December '18



£'000


£'000






Bank loan:





Greater than one year


750


-



750


-






As at 31 December 2019, SpaceandPeople plc had drawn down £0.75 million (2018: £nil) of its agreed bank revolving credit facility of £1.0 million which expires in October 2021. In addition, SpaceandPeople plc has a £0.25 million overdraft facility of which £nil was used as at 31 December 2019 (2018: £nil).

21.       Right of use assets and liabilities

Impact of adopting IFRS 16

In calculating the lease liability to be recognised on transition, the Group used a weighted average borrowing rate of 7.38% at 1 January 2019.  Below is a reconciliation of the Group's operating lease commitment at 31 December 2018 to the lease liability recognised on adoption of IFRS 16 on 1 January 2019:

Lease liabilities recognised (£'000)

Operating lease commitments at 31 December 2018 as disclosed in the Group's consolidated financial statements

383

Discounted using the incremental borrowing rate at 1 January 2019

(55)

Lease liability recognised at 1 January 2019

             328

Of which are:


Current lease liabilities

198

Non-current lease liabilities

130

The change in accounting policy increased Right of Use assets by £0.3m and increased lease liabilities by £0.3m at 1 January 2019.

2019 - Right of use assets & lease liabilities



Net book value of assets


Lease liability



£'000


£'000






Motor vehicles


93


97

Buildings


263


269



356


366






Amounts recognised in the consolidated statement of profit or loss



Depreciation charges


Interest expense



£'000


£'000






Motor vehicles


45


7

Buildings


156


3



201


10






Total operating lease payments due until the end of the lease, or the first break clause, total £366k (2018: £383k).

An analysis of these payments due is as follows:



2019


2018



£'000


£'000

Total lease payments falling due:





Within one year


206


256

Within two to five years


160


127



366


383






Below is a reconciliation of changes in liabilities arising from financing activities:


1 January

2019

Cash

flows

New

Leases

Other

31 December 2019


£'000

£'000

£'000

£'000

£'000







Current lease liabilities

198

(224)

69

163

206

Non-current lease liabilities

130

-

160

(130)

160

Total liabilities from financing activities

328

(224)

229

33

366







The "Other" column includes the effect of reclassification of non-current leases to current due to the passage of time, the effect of the disposal of lease assets with their related creditors and the effect of the unwinding of the discounted ROU creditors over time.

 

22.       Financial instruments and risk management

The Group has no material financial instruments other than cash, current receivables and liabilities, in both this and the prior period, all of which arise directly from its operations. The net fair value of its financial assets and liabilities is the same as their carrying value as detailed in the balance sheet and related notes.

 

Credit risk - The Group's credit risk relates to its receivables and is managed by undertaking regular credit evaluations of its customers.

 

Liquidity risk - The Group usually operates a cash-generative business and has significant cash headroom. The Directors consider the funding structure to be adequate for the Group's current funding requirements and this is expected to strengthen during future years.

 

Borrowing facilities - As at the balance sheet date, the Group has agreed facilities of £1.25 million, of which £0.75 million was utilised at the year end. Since the year end the Group has agreed a further £1.0 million facility through the CBILS. These facilities are secured by a floating charge.

 

Financial assets - These comprise cash at bank and in hand. All bank deposits are floating rate.

                               

Financial liabilities - These include short-term creditors and a revolving credit facility of £1 million, of which £0.75 million was utilised at the year end. All financial liabilities will be financed from existing cash reserves and operating cash flows.

 

Foreign currency risk - The Group is exposed to foreign exchange risk primarily from Euros due to its German operations and Euro denominated licensing income as detailed in note 4 - Segmental Reporting. The Group monitors its foreign currency exposure and manages the position where appropriate. In addition, the Group has investments in a subsidiary in India.

 

 

23.       Called up share capital

 

Allotted, issued and fully paid

31 December '19


31 December '18

Class

Nominal value





Ordinary

1p

£

195,196


195,196



Number

19,519,563


19,519,563

 

24.      Related party transactions

 

Compensation of key management personnel

Key management personnel of the Group are defined as those persons having authority and responsibility for the planning, directing and controlling the activities of the Group, directly or indirectly. Key management of the Group are therefore considered to be the directors of SpaceandPeople plc. There were no transactions with the key management, other than their emoluments, which are set out in the remuneration report on pages 22 to 23.

 

25.       Earnings per share                


12 months to

12 months to


31 December '19

31 December '18

as restated


Pence per share

Pence per share




Basic earnings/(loss) per share






Before non-recurring costs

0.4p

(1.7)p




After non-recurring costs

0.4p

(3.0)p




Diluted earnings/(loss) per share




0.3p

(1.5)p

Before non-recurring costs




0.3p

(2.7)p

After non-recurring costs



 

 

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

Basic earnings per share

 

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

 


12 months to

12 months to


31 December '19

31 December '18

as restated


£'000

£'000




Profit/(loss) after tax for the period attributable to owners of the Company

68

(578)

 

Non-recurring items

 

Profit/(loss) after tax for the period before non-recurring costs attributable to owners of the company

 

 

-

 

68

 

244

 

(334)


12 months to

12 months to


31 December '19

31 December '18


'000

'000




Weighted average number of ordinary shares

19,520

19,520

for the purposes of basic earnings per share



 

 

Diluted earnings per share

 

The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows:

 


12 months to

12 months to


31 December '19

31 December '18


£'000

£'000




Profit/(loss) after tax for the period attributable to owners of the Company

68

(578)

 

Non-recurring items

 

Profit/(loss) after tax for the period before non-recurring costs attributable to owners of the company

 

 

-

 

68

 

244

 

(334)

 

 

 


12 months to

12 months to


31 December '19

31 December '18


'000

'000




Weighted average number of ordinary shares

20,991

21,548

for the purposes of diluted earnings per share



 

The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows.

 


12 months to

12 months to


31 December '19

31 December '18


'000

'00




Weighted average number of shares in issue

19,520

19,520

during the period






Weighted average number of ordinary shares

1,471

2,028

used in the calculation of basic earnings per



share deemed to be issued for no



consideration in respect of employee options






Weighted average number of ordinary shares

20,991

21,548

 used in the calculation of diluted earnings per



Share



 

As set out in notes 26 and 27, there are share options and a SAYE scheme outstanding as at 31 December 2019 which, if exercised, would increase the number of shares in issue. However, the diluted loss per share is the same as the basic loss per share, as the loss for the year has an anti-dilutive effect.

 

26.       Share options

 

The Group has established a share option scheme that senior executives and certain eligible employees are entitled to participate in at the discretion of the Board which is advised on such matters by the Remuneration Committee.

 

In aggregate, share options have been granted under the share option scheme over 1,815,325 ordinary shares exercisable within the dates and at the exercise prices shown below, being the market value at the date of the grant.

 

Date of grant

Number

Option period

Price

 





12 January 2015

27 March 2017

415,325

300,000

12 January 2018 - 12 January 2025

29 March 2020 - 27 March 2027

47.4p

22.0p

1 July 2019

1,000,000

1 July 2022 - 1 July 2029

12.0p

1 October 2019

100,000

1 October 2022 - 1 October 2029

13.5p

 

The movement in the number of options outstanding under the scheme over the period is as follows:

 


12 months to

12 months to


31 December '19

31 December '18







Number of options outstanding as at the beginning of the period

769,325

1,885,522




Granted

1,100,000

-

Lapsed

Forfeited

-

(54,000)

(1,016,197)

(100,000)

Number of options outstanding as at the end of the period

1,815,325

769,325

 

In total, 1,815,325 options were outstanding at 31 December 2019 (769,325 at 31 December 2018) with a weighted average exercise price of 21.8p (35.8p at 31 December 2018).

 

The total share-based payment charge for the year, calculated in accordance with IFRS2 on share-based payments, was £nil (2018: £nil).

27.       Save As You Earn Scheme

The Group has a Save As You Earn ("SAYE") scheme that all UK based employees are entitled to participate in. The scheme runs for three years from 1 July 2017 with the opportunity to buy shares at a price of 19.5p, a 20% discount on the average closing share price on the three working days from 20 to 24 April 2017.

 

Share options have been granted under the SAYE scheme over 59,072 ordinary shares exercisable within the dates and at the exercise prices shown below, being the market value at the date of the grant.

 

Date of grant

Number

Option period

Price

 

18 May 2017

59,072

1 July 2020 - 31 December 2020

19.5p

 

The movement in the number of options outstanding under the scheme over the period is as follows:

 


12 months to

12 months to


31 December '19

31 December '18







Number of options outstanding as at the beginning of the period

376,604

675,200




Granted

Lapsed

-

-

-

(21,677)

Forfeited

(317,532)

(276,919)

Number of options outstanding as at the end of the period

59,072

376,604

 

In total, 59,072 options were outstanding at 31 December 2019 (376,604 at 31 December 2018) with an average exercise price of 19.5p (19.5p at 31 December 2018).

 

The total share-based payment charge for the year, calculated in accordance with IFRS2 on share-based payments, was £nil (2018: £nil).

 

28.       Events after the balance sheet date

As at the time of issuing this report, the COVID-19 pandemic has had a significant effect on the Group which is explained in the Chief Executive Officer's Review on pages 7 to 10 and in the accounting policies. The Group does not consider this to be an adjusting event as the COVID-19 pandemic occurred after the year end and consequently there is no impact on the Group's 2019 results. At this time, the directors do not consider it possible to quantify any impact on the carrying value of assets or liabilities that would result in a non-adjusting post balance sheet event.

 

The effects of lockdown, social distancing and travel restrictions are having a material impact on the Group's ability to generate revenue during 2020. The Group has implemented business continuity plans with staff, lenders and clients and has sufficient resources to allow it to continue to trade effectively during this period. As part of these plans the business accessed a £1m five-year loan through the Coronavirus Business Interruption Loan Scheme.

 

 

For further information, contact:

 

SpaceandPeople Plc

0845 241 8215

Matthew Bending, Gregor Dunlay




 

Cantor Fitzgerald Europe

 

020 7894 7000

David Foreman, Will Goode (Corporate Finance)


 

 


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