Final Results

RNS Number : 7111A

SpaceandPeople PLC

25 March 2013

 



SpaceandPeople plc

("SpaceandPeople" and "the Company")

Final Results and Proposed Final Dividend

SpaceandPeople, the retail, promotional and brand experience specialist, is pleased to announce its final results for the 12 months ended 31 December 2012.

Financial Highlights

·     12% growth in gross sales to £30.11m

·     22% growth in net revenue to £13.06m

·     37% growth in operating profit to £2.37m

·     43% increase in pre-tax profit to £2.27m

·     39% increase in basic EPS to 8.50p

·     Dividend increased by 21% to 3.5p

Operational Highlights

·     Revenue from UK promotional activity up 34%

·     Revenue from German promotions up 61%

·     Revenue from German retail licensing activity up 124%

·     Strong cash generation of £2.27m from operating activities resulting in net cash improvement of £869k over the year with a positive cash position at the year-end of £2.02m

·     Major new contract wins in the UK with both Land Securities and Intu (formerly Capital Shopping Centres) signing exclusive promotional contracts for the first time

·     Major new contract win in Germany with MEC Metro signing an exclusive deal towards the end of the year

·     Now have exclusive promotional/retail rights in 34 of the 50 top shopping centres in the UK and have provided services to 88 of the top 100 shopping centres during 2012

·     Launch of S&P+ Limited

·     Further investment in SpaceandPeople India

·     Over 10,000 unique promotions and kiosks in over 700 venues across four major global markets during 2012

For further information, contact:

SpaceandPeople Plc	0845 241 8215
Matthew Bending, Gregor Dunlay
Cantor Fitzgerald Europe	020 7107 8000
David Foreman, Stewart Dickson (Nominated Adviser)
Richard Redmayne, Paul Jewell (Corporate Broking)

Chairman's Statement

Overview

I am delighted to present an excellent set of results for 2012. The long-term benefits of the acquisition of Retail Profile, which I alluded to last year, together with growth in the core business, are readily apparent from the dramatically improved performance from almost every aspect of the business. At a time of increasing uncertainty and general despondency in the UK retail sector, this is an unashamedly positive and upbeat report.

The Group secured notable contract wins in the UK with two of the country's largest publicly traded owners of shopping centres, Land Securities and Intu. Giving the Group exclusive promotional contracts for the first time and making it the clear market leader in the UK. It now has exclusive promotional or retail contracts in 34 of the top 50 UK shopping centres and traded with 88 of the top 100 during the year, which helped increase revenue from UK promotional activity by 34%.  The best locations in the best centres, together with the launch of S&P+ Limited will continue to drive improved performance from one of the core strands of the business.

The German business is now firmly established and delivering impressive growth as the locally based team of 27 people in our new office in Hamburg continues to increase sales from the core portfolio of ECE shopping centres, with promotion revenue up by 61%. Towards the end of 2012 they secured a major new exclusive contract with MEC Metro, which will sustain this growth and reinforce the dominance of SpaceandPeople in the German market. The investment in new mobile kiosks and their roll-out to more centres has resulted in a 124% increase in revenue from German retail licensing. All of this translates to an excellent set of results.

Financial results

Starting with the financial highlights, there was a 22% growth in Group revenue to £13.06m and a 37% increase in Group operating profit to £2.37m. 

There was a 39% increase in basic (after non-recurring costs) non-diluted EPS to 8.50p from 6.13p in 2011.  Mindful of the significant opportunities available from further investment in the business, the Board has proposed that the dividend is increased at a slightly lower rate than the increase in EPS in 2012.

Notwithstanding further investment in overseas markets, S&P+ Limited and additional sales, compliance and support staff, the Group ended the year on a secure financial footing, with a net cash improvement of £869k during the year and £2.02m of cash on the balance sheet at the year end.  The Group also has a flexible borrowing facility of £2.5m with Lloyds TSB Group that provides the ability to fund its future growth from existing banking arrangements.

People

None of this would be possible without a dedicated and committed workforce and I would like to thank the senior management team and staff for their sterling efforts throughout the year.  There have been no changes at board level this year and the average headcount has increased from 81 to 99.

Dividend

Recognising the excellent progress made by the Group, your Board is proposing a dividend of 3.50p per share, an increase of 21% on last year, payable on 26^th April 2013 to all shareholders on the register on 5^th April 2013.

Outlook

SpaceandPeople continues to add new venues to the service and now represents over 700 venues in the UK and Germany, an increase of over 100 on 2011 with a combined footfall of over 70 million customers a year.

Although one can never be complacent and must always be alert to external challenges, the figures are testament to the strength and diversity of the business and the Group is extremely well positioned to deliver further improvements in 2013. 

David Henderson-Williams

Chairman

22 March 2013

Chief Executive Officer's Review

Who we are and what we do

The premise of SpaceandPeople is based upon the fact that venue owners have sought to improve returns on their assets, however building new venues or increasing rents can be difficult. Previously, property owners used general in-house staff to generate revenues by encouraging local businesses into their space to promote products and services. This tended to be an ad-hoc and reactive process and there was no information available to promoters to incentivise them to make use of this opportunity.  SpaceandPeople identified the opportunity that was available to promoters to meet their potential customers face to face and the fact that this was of great value to them. They also enabled venues to be more structured in how they dealt with promoters and gave them a better understanding of the value of their space in this regard. From small beginnings in 2001, we now represent over 700 venues, facilitating over 10,000 promotions a year in venues ranging from prime shopping centres to retail parks and train stations in four different countries as a result of being able to facilitate the use of high footfall space as a medium to transact business.

One of SpaceandPeople's key skills is in understanding the value and type of user for any space at any time in any venue, then executing that understanding through the marketing and selling of that public space. This is usually done on a revenue share basis with the venue, so we only make money if they make money, essentially making our service free to buyers.

Since inception, our relationships with venues have become more sophisticated, with longer term contracts of increased value to all parties.  As the first company to create this business model, we have innovated constantly so that property owners now have a range of online analytics and measurement tools which allow them to understand the value and utilisation of their common areas.

These spaces are not utilised only for promotions but also retailing. The purchase of Retail Profile Europe in 2010 by SpaceandPeople enabled venue owners to amalgamate their commercialisation into a one stop shop. The combined knowledge of both companies and active venue space management has also enabled us to help them to plan their overall long-term strategy for their space.

Growth areas

In order to help grow the number of experiential marketing events that take place on our clients' spaces, we need to make those parties who are responsible for booking events aware of the benefits of this opportunity. Media agencies control all the Above the Line (ATL) advertising budgets (estimated to be £15 billion in the UK last year), however uptake by them of experiential campaigns in venues has so far been slow. This is due to our industry not being ready to support them by providing meaningful and transparent data, or making the service easy to purchase. To address this need, we along with media buying specialists, have invested in S&P+ Limited. This company will talk to the major media agencies and provide them with the resource to include experiential marketing in their strategic decision making and budget setting. They will also be supported by a web buying portal to facilitate the purchasing of all the fundamental building blocks of an experiential campaign: logistics, staff, creative, accommodation and tailored training packages. The objective is to show agencies and brands that experiential marketing in our clients' venues is an essential and cost effective way of promoting a huge number of businesses, products and services.

Investment

2012 saw significant investment in the German mobile kiosk roll-out, with the number of units in operation increasing from 48 to 99 units in three regions; a fantastic effort by the team. Shopping centres in particular are raising their game regarding visitor experience and SpaceandPeople has responded by developing ground breaking new retail unit designs, new approaches for pop-up shops and training schemes to ensure that we play a key part in this improvement.

To increase the efficiency of the business, we have created an automated business intelligence platform. This allows managers to have a dashboard of key, real time date data that they can share with venues and promoters. This investment is on-going and we will roll-out new products that support and streamline our management of venues during 2013.

Strength and stability

Diversification of our client base and revenue streams has been a key strategic aim of the business. Having revenue streams from a number of countries and different product types allows us to deal with specific local issues while also enabling us to deliver major cross border campaigns for customers. This has resulted in us delivering over £30million in gross turnover for the first time in 2012 with further growth expected in 2013. Retail licensing income is set to double in 2013 in Germany, the biggest retail market in Europe with an expanding retail property sector, and European promotions are growing at a similar pace.

The only missed opportunity in 2012 has been India where the business has had a mixed year. The development of the kiosks selling MacV sunglasses has been a great success, with 7 kiosks operating in Mumbai, Hyderabad and Chennai. Planned expansion in 2013 is for another 7 units. However, the promotions business of SpaceandPeople India has suffered in the slowing Indian economy.  The UK business found in 2009 that marketing spend in difficult economic times is one of the first items in many budgets to be cut, however, the promotional budgets in many sales departments remained unaffected. As in the UK, the Indian business has now reorganised, strengthened its local sales teams and started selling to Sales Directors as well as Marketing Directors.  I am pleased to say, although not out of the woods yet, the promotional business is making good progress in the first quarter of 2013.

The most significant development of the business, in my opinion, was that global brands such as Samsung, VW, Microsoft, Skoda and Nokia simultaneously launched products using SpaceandPeople's offices in Germany, India and the UK.  I see this as the initial step in developing the strategic use of experiential marketing as a media with SpaceandPeople managed venues being the preferred locations.

The first quarter of 2013 has started very positively and we look forward to another year of success.

Matthew Bending

Chief Executive Officer

22 March 2013

Operating and Financial Review

Structure

Throughout 2012, the Group continued to take advantage of its business model, which ensures that through having a strong core of experienced and talented staff, an in-depth and disciplined training programme and stable and robust IT systems, it was able to grow across its promotional and retail licensing businesses, in both the UK and German marketplaces, at a strong and sustainable rate.

The Group has continued to grow the level of income it provides to its venue partners, and therefore its own income. This is as a result of the successful recruitment of additional sales management and staff as well as winning significant new contracts in both the UK and Germany as a result of our track record, our ability to move quickly to meet their needs and our stability and financial strength.

The Group continues to invest in improved systems and support staff that will provide it and its partners with enhanced information as well as continuing the programme of recruitment and staff development to ensure that revenue is maximised for all parties.

The scalable nature of the business means that additional gross profit can be delivered without the need for significant increases in central overheads as has been demonstrated in 2012 and is forecast to continue in 2013.

Revenue

During 2012, the Group generated £30.11m of gross revenue for its clients. This was 12% higher than in the previous year. Net revenue earned by the Group was £13.06m, which represents growth of 22% in absolute terms (25% removing the effects of currency movements). This growth was driven by the businesses in Germany, where promotions revenue increased by 61% to £1.96m and retail licensing revenue increased by 124% to £1.97m. The UK promotions business also grew by 34% to £3.27m, a significant part of which was due to securing the exclusive deals with Land Securities and Intu across their shopping centre portfolios. Revenue from the UK retail licensing business fell by 6% during 2012 as a result of one of our major clients implementing a new strategy that included reducing the number of kiosks across their portfolio of shopping centres. However, we are working closely with them to roll-out a new design of mobile kiosk that will be attractive to both the client and operators and should result in increased revenues going forwards.

During 2012, the Group booked over 10,000 unique promotions and mobile kiosks into over 700 venues. The volume and value of individual bookings demonstrates the diversity of our business as well as its complexity. We believe that we offer the best opportunity for venue owners to maximise the income from their mall space as well as offering an attractive, current and engaging variety of promotions and retail offerings.

Administrative expenses

In order to deliver the increased revenue, administrative expenses grew by 22% to £10.90m. This was due mainly to the increase in rent payable to German venues in relation to mobile kiosks to £0.92m (2011: £0.43m) and the increase in staff as the sales and support team was expanded in order to deliver the increased sales to venues. The average headcount in the Group increased to 99 from 81 in 2011. Revenue per employee remained constant at £132k as it was in 2011.

Profit

Operating profit grew by 37% to £2.37m (2011: £1.73m) and profit before taxation, but after adjusting for minority interests, grew by 47% to £2.33m.

The increase in the rate of corporation tax payable from 25% to 29% is as a result of an increase proportion of the profitability of the Group being delivered by the German businesses where the combined rate of corporate taxation is significantly higher than in the UK.

Basic EPS increased to 8.50p (2011: 6.13p), an increase of 39% and fully diluted EPS increased to 7.78p (2011: 5.75p). Basic EPS is calculated as profit after tax divided by the weighted average number of shares in issue during the year which was 19,439,527, up from 19,431,063 in 2011. 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 21,271,423, up from 20,712,139 in 2011.

Cash flow

The Group generated £2.27m of net cash flow from operating activities which was £134k higher than the amount generated in 2011. The increase in both trade debtors and trade creditors are due to the Group facilitating an increased number of long-term contracts between venues and promoters that helps improve the stability and visibility of sales.

Dividends

The Group is proposing a final dividend of 3.50p per share at the Annual General Meeting on 25 April 2013. If approved, this will be paid on 26 April 2013 and will be 21% higher than the dividend paid during 2012. This dividend would represent a distribution to shareholders of 41% of the basic EPS in the year which is down from 47% in the previous year. We expect to maintain dividend growth broadly in line with EPS going forward.

Potential risks

Loss of client

The Group has a diverse portfolio of clients and this has been added to during 2012 with the significant addition of Land Securities, Intu and MEC-Metro. The loss of a client is not something we take lightly and we go to considerable lengths to ensure that our clients are satisfied with the level of business, support and quality assurance that they receive. As no single contract accounts for more than 15% of Group revenue or 17% of gross profit, and given the scalability of the business, the loss of a significant client, while unwelcome, would not put the results or the resources of the business at significant risk especially as we continue to attract new clients.

Loss of key personnel

The loss of any member of senior management would be unwelcome, however, with a large and experienced team in place including three Managing Directors in the German businesses, a Managing Director in India, a UK Director of Sales and a UK Venues Director, in addition to the Executive Directors, the business is not overly dependent on any one individual. There is also a strong and experienced group of managers and support staff in all areas of the business as well as a large and diverse sales team. Due to the way staff are remunerated through competitive basic salaries and attractive commission and bonus opportunities, as well as the provision of training and an enjoyable working environment, the business does not experience a high level of staff turnover despite the demands it places upon them.

System failure

Whilst no guarantees can be given that all possible eventualities are covered, the Group has comprehensive and strict policies and contingency plans concerning power outages, telecommunications failure, virus protection, hardware and software failure, frequent and full offsite backup of all data and disaster recovery, with contracts and service level agreements in place with suppliers to ensure that any disruption and risk to the business is kept to an absolute minimum.

Legal claims

The Group constantly reviews its exposure to possible legal claims and takes appropriate advice and action to protect both itself and its clients where any avoidable risk is identified, for example, by amending terms and conditions, service agreements and licences.

Economic climate

The business has in the past proven itself to be alert to changes in the economic climate in the territories in which it operates and has the flexibility to respond to these changes to ensure that neither it nor its clients suffer as a result. Although much of its business is transacted in a retail environment, the Group is neither a retailer nor a landlord and what it offers to its clients and customers is access to a targeted demographic in appropriate high footfall venues. As long as people have a propensity to congregate and promoters and operators want to meet their potential customers, this will continue to be successful.

Summary

2012 represented another successful year for the Group with revenue, profit, EPS and dividends all at record highs. The Group achieved this while still investing in key management roles, sales and support staff, equipment and IT infrastructure, not to mention launching S&P+. All of this investment has been undertaken to ensure that the Group continues to grow strongly throughout 2013 and beyond.

Gregor Dunlay

Chief Financial Officer

22 March 2013

Sunglass Retail Brand, MacV, Achieves Successful Launch in India

Background

MacV Eyewear was launched in March 2012 by SpaceandPeople plc as a sunglass brand following an initial pilot, which had identified a gap in the market for high quality sunglasses to rival similar brands at the same price point. An independent retailer licensed the business model for India, starting in one location in Mumbai, which was quickly rolled-out to an additional two shopping centres. MacV is currently retailing from kiosks in shopping centres to establish the brand and increase market presence with kiosks in seven locations within three cities in India (Mumbai, Hyderabad and Chennai). The brand has a very successful up-sell offer for multiple purchases, which accounts for a large proportion of sales. A key differentiator from its competitors is the breadth and depth of MacV's product range - the kiosks typically retail a wide selection of 120 styles in at least 2-3 different colours, which is more than any other similar brand.

Challenges

As India covers such a vast area and has very distinct cultural and regional differences, the licensee has found that the product range required in each region varies dramatically. There are variations in weighting of product lines for males and females, lens types and styles. This is even the case within a single city such as Mumbai, where each kiosk has its own bespoke product mix. Again, due to the footprint of the country, there are a number of logistical challenges which have had to be overcome. MacV is working with its licensee to expand their presence in order to service the market throughout India.

Success So Far

SpaceandPeople India has assisted the licensee in securing attractive and successful sites within shopping centres for the MacV kiosks as well as helping to enhance the appearance of these kiosks as the business has developed. The licensee has also liaised with shopping centre owners to arrange MacV brand sponsorship at key venue events.

Plans for Future

SpaceandPeople and the licensee have already begun work to further regionalise the marketing and promotion of the business. Once a local presence has been established throughout the country and the brand is able to service the whole of India, MacV will look to assist in the development of the business as a web based retailer in addition to physical kiosks in venues. The plan for 2013 is to oversee the roll-out of an additional 7 to 8 kiosk in shopping centres throughout India. As the success of the licence model is demonstrated, SpaceandPeople plc will look to use this success to roll-out the concept in other countries.

SpaceandPeoplePlus offers the experiential agency sector tools and services to maximise the effectiveness of campaigns

 Background

 SpaceandPeoplePlus is a compelling new offering to the experiential industry, a full media owner service which builds on the destination media service currently offered by SpaceandPeople, expanding into all the different venue and outsourced sectors purchased by the experiential marketing industry.  It will provide a one stop shop for venue and general procurement sourcing. The company aims to fill a void in brand experience, namely the lack of an industry representative body to market the experiential channel, showing how to drive value from it, and build share for it.   Marketed correctly, the experiential marketing sector should be getting a greater share of budget in integrated marketing campaigns.

SpaceandPeoplePlus aims to educate agencies on how to target and connect with a group of consumers known as Conversation Catalysts, the most influential and connected group in the populace who make up 7.6 per cent of the UK population and are the most influential for establishing long-term brand value via word of mouth. In addition, the company is aiming to consolidate industry purchasing to effectively drive cost down and quality up, growing the market through lowering the cost of client entry.

This strategy grows the market, grows SpaceandPeople's venue share within it and diversifies SpaceandPeople's service delivery from the current 5% mall specific venue sales element of budget, into the balance of 60% of spend outsourcing that is driven from this market. The market is estimated to be worth £400m.

A sophisticated online campaign planner and one point purchasing system is available via the website, offering agencies integrated planning and sourcing systems, saving human resource and driving efficiency. This includes an ever expanding database of venue metrics, demographics and industry research, providing a unique platform of expertise for planners and buyers to tap into.

The service also aims to raise standards for the industry by offering industry specific, accredited training, initially to drivers specialising in the event and experiential sector to ensure legal obligations are met, agencies are using top quality professionals, and maximum logistical efficiencies are driven.

Challenges

The current challenge is to raise awareness of the imbalance between the consistently increasing dominance of brand conversations face-to-face in recent years and the comparably low budget share of experiential marketing (the total media market is c£16bn), making it a relatively untapped market. Conversation Catalysts are the key to this as brands that reach out to them will see long-term gains, helping to justify the higher cost per contact that brand experience brings compared to other media channels.

Success So Far

SpaceandPeoplePlus has already secured cooperation with a range of core industry suppliers and is aggressively expanding that list. In addition, 27 agencies put the systems on trial in the first week after launch.

Plans for Future

As the company is very much in its infancy, the key focus in the coming months is to:

·      Educate buyers in the benefits of targeting Conversation Catalysts effectively.

·      Gain standard use of the company systems industry wide.

·      Engage as broad a group of suppliers as possible, facilitating a one stop shop.

Consolidated Group Statement of Comprehensive Income

For the 12 months ended 31 December 2012

	Notes		12 months to 31 December '12 £'000		12 months to 31 December '11 £'000
Revenue	4		13,055		10,660
Administration expenses			(10,900)		(8,905)
Other operating income			216		73
Operating profit before non-recurring costs	4		2,371		1,828
Non-recurring costs	5		-		(95)
Operating profit	6		2,371		1,733
Finance costs	8		(97)		(145)
Profit before taxation			2,274		1,588
Taxation	9		(678)	`	(397)
Profit after taxation			1,596		1,191

Other comprehensive income
Foreign exchange differences on translation of foreign operations			(29)		(49)
Total comprehensive income for the period			1,567		1,142
Profit for the year attributable to:
Owners of the Company			1,654		1,191
Non- controlling interests			(58)		-
			1,596		1,191
Total comprehensive income for the period attributable to:
Owners of the Company			1,625		1,142
Non- controlling interests			(58)		-
Total comprehensive income for the period			1,567		1,142

Earnings per share	26
Basic - before non-recurring costs Basic - after non-recurring costs Diluted - before non-recurring costs			8.50p 8.50p 7.78p		6.49p 6.13p 6.09p
Diluted - after non-recurring costs			7.78p		5.75p

Consolidated Group Statement of Financial Position

At 31 December 2012

Company number SC212277

	Notes		31 December '12 £'000		31 December '11 £'000
Assets
Non-current assets:
Goodwill	12		8,225		7,981
Investment in associates	13		-		156
Other intangible assets	14		20		26
Property, plant & equipment	15		1,362		1,220
			9,607		9,383
Current assets:
Trade & other receivables	17		3,839		3,015
Cash & cash equivalents	18		2,019		1,433
			5,858		4,448
Total assets			15,465		13,831
Liabilities
Current liabilities:
Trade & other payables	19		5,069		4,219
Current tax payable	19		289		246
Other borrowings	20		455		738
			5,813		5,203
Non-current liabilities:
Deferred tax liabilities	16		10		10
Long-term loan	21		730		958
			740		968
Total liabilities			6,553		6,171
Net assets			8,912		7,660
Equity
Share capital	24		194		194
Share premium			4,830		4,816
Special reserve			233		233
Retained earnings			3,478		2,417
Equity attributable to owners of the Company			8,735		7,660
Non-controlling interest			177		-
Total equity			8,912		7,660

The financial statements were approved by the Board of Directors and authorised for issue on 22 March 2013.

Signed on behalf of the Board of Directors by:

MJ Bending - Director

Consolidated Group Statement of Cash Flows

For the 12 months ended 31 December 2012

	Notes	12 months to 31 December '12 £'000			12 months to 31 December '11 £'000
Cash flows from operating activities
Cash generated from operations		3,001			2,738
Interest paid		(97)			(145)
Taxation		(635)			(458)
Net cash inflow from operating activities		2,269			2,135
Cash flows from investing activities
Purchase of intangible assets	14	(30)			(4)
Purchase of property, plant & equipment	15	(424)			(745)
Net cash (outflow) from investing activities		(454)			(749)
Cash flows from financing activities
Proceeds from issue of shares		14			-
Funding costs on acquisition of subsidiary, net of cash received		(168)			-
Repayment of bank loan / loan notes		(463)			(1,977)
New bank facility received		235			265
Dividends paid	11	(564)			(505)
Net cash (outflow) from financing activities		(946)			(2,217)
Increase / (decrease) in cash and cash equivalents		869			(831)
Cash and cash equivalents at beginning of period		1,150			1,981
Cash and cash equivalents at end of period	18	2,019			1,150

Reconciliation of operating profit to net cash flow from operating activities
Operating profit		2,371			1,733
Amortisation of intangible assets	14	36			66
Depreciation of property, plant & equipment	15	310			191
Effect of foreign exchange rate moves		(29)			(49)
(Increase) / decrease in receivables		(497)			(373)
Increase / (decrease) in payables		810			1,170
Cash flow from operating activities		3,001			2,738

Group Statement of Changes in Equity

For the 12 months ended 31 December 2012

		Share capital £'000		Share premium £'000		Special reserve  £'000		Retained earnings £'000		Non-controlling Interest £'000		Total equity £'000
At 31 December 2010		194		4,816		233		1,780		-		7,023
Comprehensive income:
Foreign currency translation		-		-		-		(49)		-		(49)
Profit for the period		-		-		-		1,191		-		1,191
Total comprehensive income		-		-		-		1,142		-		1,142
Transactions with owners:
Dividends paid		-		-		-		(505)		-		(505)
Total transactions with owners		-		-		-		(505)		-		(505)
At 31 December 2011		194		4,816		233		2,417		-		7,660

Comprehensive income:
Foreign currency translation		-		-		-		(29)		-		(29)
Profit for the period		-		-		-		1,654		(58)		1,596
Total comprehensive income		-		-		-		1,625		(58)		1,567
Shares issued Dividends paid Minority interest on acquisition		- - -		14 - -		- - -		- (564) -		- - 235		14 (564) 235
		-		14		-		(564)		235		(315)
At 31 December 2012		194		4,830		233		3,478		177		8,912

Notes to the Financial Statements

For the 12 months ended 31 December 2012

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 2012 and for the comparative period ended 31 December 2011 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 part of the Companies Act 2006 applicable to companies reporting under IFRS.

The Directors have, at the time of approving the financial statements, a reasonable expectation that SpaceandPeople has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.

Future accounting developments

New and revised IFRSs affecting amounts reported in the current period (and/or prior periods)

The following new and revised IFRSs have been applied in the current period and have affected the amounts reported in these financial statements.

New and revised IFRSs affecting presentation and disclosure only

Title	Implementation	Effect on Group
Amendment to IAS 1, 'Financial statement presentation', regarding other comprehensive income	1 July 2012	None

New and revised IFRSs applied with no material effect on the consolidated financial statements

Title	Implementation	Effect on Group
Amendment to IAS 12, 'Income taxes', on deferred tax	1 January 2012	None

The following standard will be introduced in future periods

Title	Implementation	Effect on Group
IAS 19 -  Amendment to 'Employee benefits'	Annual periods beginning on or after 1 January 2013	None
IAS 27: (Revised 2011) 'Separate financial statements'	Annual periods beginning on or after 1 January 2013	None
IAS 32: Amendments to 'Financial instruments presentation' on asset and liability offsetting	Annual periods beginning on or after 1 January 2014	None
IFRS 9 - Financial instruments	Annual periods beginning on or after 1 January 2015	None
IFRS 10 -  Consolidated financial statements	Annual periods beginning on or after 1 January 2013	None
IFRS 11 - Joint arrangements	Annual periods beginning on or after 1 January 2013	None
IFRS 12 -  Disclosure of interests in other entities	Annual periods beginning on or after 1 January 2013	None
IFRS 13 - Fair value measurement	Annual periods beginning on or after 1 January 2013	None
IFRS 7 - Amendments to 'Financial instruments: Disclosures' on asset and liability offsetting	Annual periods beginning on or after 1 January 2013	None

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 foresee currently 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.

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree.  Acquisition-related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date.

Goodwill is measured as the excess of the sum of the consideration transferred, over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed.  If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the excess is recognised immediately in profit or loss as a bargain purchase gain.

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see above) 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.

Investments in associates

The results, assets and liabilities of associates are incorporated in the consolidated financial statements using the equity method of accounting.  Under the equity method, an investment in an associate is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the associate.  When the Group's share of losses of an associate exceeds the Group's interest in that associate (which includes any long-term interest that, in substance, form part of the Group's net investment in the associate), the Group discontinues recognising its share of further losses.  Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Where there is no material difference between the cost of investment in an associate and the Group's share of its net assets no adjustment is made and the associate is carried at cost.

The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group's investment in an associate.  When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS36 Impairment of Assets as a single asset by comparing its recoverable amount (higher value in use and fair value less costs to sell) with its carrying amount.  Any impairment loss recognised forms part of the carrying amount of the investment.  Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

When a Group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the Group's consolidated financial statements only to the extent of interests in the associate that are not related to the Group.

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.

Commission

Revenue from commission 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

Leasing Income

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

Royalties

Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement.  Royalties determined on a time basis are recognised on a straight line basis over the period of the 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

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

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	-	25% 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.

Foreign development - The Group capitalises costs relating to the development of its process and service in certain foreign markets. Costs are only capitalised where the Group considers that there is a clearly definable project and in each case a process is separately identifiable which has its own individual value. Costs are capitalised in relation to countries where there is a reasonable expectation that future revenues will exceed capitalised costs. Where the criteria for capitalisation are not met, costs are written off in the year incurred. Capitalised costs are written off over five 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.

Leasing commitments

Rentals paid under operating leases are charged against profit as incurred. The Group has no finance leases.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight line basis over the term of the relevant lease.

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

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 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 branch office in Hamburg, Germany. These are reported separately. In addition, Retail Profile 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 business segments - Promotional Sales and Retail, split by geographic area. Prior Year comparatives have been restated to disclosed Head Office costs separately:

Segment revenues and results for 12 months to 31 December '12	Promotion UK £'000	Promotion Germany £'000	Retail  UK £'000	Retail Germany £'000	Head Office £'000	Other £'000	Group £'000
Continuing operations revenue	3,269	1,958	5,739	1,967	-	122	13,055
Administrative expenses	(1,928)	(1,224)	(4,447)	(1,743)	(1,246)	(312)	(10,900)
Other revenue	-	32	-	113	-	71	216
Segment operating profit / (loss)	1,341	766	1,292	337	(1,246)	(119)	2,371
Finance costs	(8)	-	(89)	-	-	-	(97)
Segment profit / (loss) before taxation	1,333	766	1,203	337	(1,246)	(119)	2,274

Segment assets and liabilities  as at 31 December '12	Promotion UK £'000	Promotion Germany £'000	Retail  UK £'000	Retail Germany £'000	Other £'000	Group £'000
Total segment assets	6,254	1,676	5,736	1,691	559	15,916
Total segment liabilities	(1,822)	(710)	(3,012)	(1,387)	(73)	(7,004)
Total net assets	4,432	966	2,724	304	486	8,912

Segment revenues and results for 12 months to 31 December '11	Promotion UK £'000	Promotion Germany £'000	Retail  UK £'000	Retail Germany £'000	Head Office £'000	Group £'000
Continuing operations revenue	2,440	1,218	6,125	877	-	10,660
Administrative expenses	(1,706)	(719)	(4,513)	(835)	(1,132)	(8,905)
Other revenue	-	11	-	62	-	73
Segment operating profit / (loss)	734	510	1,612	104	(1,132)	1,828
Non-recurring costs	(33)	(62)	-	-	-	(95)
Segment operating profit / (loss)	701	448	1,612	104	(1,132)	1,733
Finance costs	(41)	-	(104)	-	-	(145)
Segment profit / (loss) before taxation	660	448	1,508	104	(1,132)	1,588

Segment assets and liabilities  as at 31 December '11	Promotion UK £'000	Promotion Germany £'000	Retail  UK £'000	Retail Germany £'000	Group £'000
Total segment assets	7,757	1,413	3,447	1,214	13,831
Total segment liabilities	(2,242)	(214)	(3,213)	(502)	(6,171)
Total net assets	5,515	1,199	234	712	7,660

 5.         Non-recurring costs

5.                                        

No expenses relating to the prior year have been charged against current year income.

In the prior period, non-recurring costs of £94,870 related to the restructuring of the UK business following the acquisition of Retail Profile Holdings Limited (£12,322) and prior year costs charged against current year income (£82,548).

6.          Operating profit

The operating profit is stated after charging:

	12 months to  December '12 £'000	12 months to December '11 £'000
Motor vehicle leasing	35	35
Property leases	203	184
Amortisation of intangible assets	36	66
Depreciation of property, plant and equipment	310	191
	584	476
Auditor's remuneration:
Fees payable for: Audit of Company	29	22
Audit of subsidiary undertakings	10	11
Tax services	3	4
Other services	17	15
	59	52
Directors' remuneration	628	532

7.          Staff costs

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

	12 months to December '12	12 months to  December '11
Executive Directors	6	5
Administration	20	20
Telesales	43	34
Commercial	20	16
Maintenance	10	6
	99	81

	12 months to December '12 £'000	12 months to  December '11 £'000
Wages and salaries	3,642	2,926
Social Security costs	428	332
Pensions	18	-
	4,088	3,258

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

8.          Finance income and costs

	12 months to December '12 £'000	12 months to December '11 £'000
Finance costs:
Interest payable	(97)	(145)

9.          Taxation

	12 months to December '12 £'000	12 months to December '11 £'000
UK corporation tax:
Corporation tax	334	408
Adjustment in respect of prior period	(20)	(219)
Foreign tax:
Current tax on foreign income for the period	364	27
Deferred tax:
Relating to the origination of timing differences	-	181
Income tax expense as reported in the Income Statement	678	397

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

	12 months to December '12 £'000	12 months to December '11 £'000
Profit on ordinary activities before tax	2,332	1,588
Profit on ordinary activities at the standard rate of corporation tax in the UK of 24.5% (2011: 26.5%) - Jan - Mar:28% (2011)                                                                 Apr - Dec: 26% (2011)                                                                 Jan - Mar: 26% (2012)                                                                 Apr - Dec: 24% (2012)	571	421
Tax effect of:
-       Expenses not deductible for tax purposes	13	-
-       Difference due to foreign taxation rates	94	(7)
-       Deferred tax	-	(17)
Income tax expense as reported in the Income Statement	678	397

10.        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 £382,418 after the incorporation of all UK head office costs (2011: £202,276) which is dealt with in the financial statements of the parent Company.

11.        Dividends

	12 months to December '12 £'000	12 months to December '11 £'000
Paid during the period	564	505
Recommended final dividend	681	564

Equity - 2.90p per ordinary share proposed and paid for 2011. Recommended final dividend for 2012 -3.50p per ordinary share.

The recommended final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in the financial statements.

12.                Goodwill

Cost	£'000
At 31 December 2010	7,981
Additions	-
At  31 December 2011	7,981
Additions	244
At 31 December 2012	8,225

Accumulated impairment losses
At 31 December 2010	-
Charge for the period	-
At  31 December 2011	-
Charge for the period	-
At 31 December 2012	-

Net book value
At 31 December 2010	7,981
At  31 December 2011	7,981
At 31 December 2012	8,225

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 business of Retail Profile Holdings Limited is an identifiable CGU and the carrying amount of Goodwill is allocated against this CGU. No amortisation of the carrying value has been occurred at the financial statement review date. Goodwill for Retail Profile Holdings Limited remains unchanged at £7,981,000.

The recoverable amount of the cash generating unit is determined on a value in use calculation which uses cash flow projections based on financial budgets approved by the Board covering a 20 year period and a discount rate of 6% per annum. Cash flow projections during the budget period are based on a steady 5% growth in EBITDA which the Directors consider to be very conservative given the plans for the business and the potential increased returns. The Directors believe that any reasonable possible change in the key assumptions on which the recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash generating unit. The discounted cash flows exceed the carrying value in Year 4.

On 4 June 2012, SpaceandPeople India Pvt Ltd, a company that was until this date an associated company of SpaceandPeople plc, issued a further 250,000 shares. This increased the total issued share capital of SpaceandPeople India Pvt Ltd to 1,083,642 shares. As a result of shares acquired at that time, the Company's shareholding increased to 564,973 shares. This represents 52.14% of SpaceandPeople India Pvt Ltd issued share capital and with effect from 4 June 2012; SpaceandPeople India Pvt Ltd became a subsidiary of the SpaceandPeople Group.

Since 4 June 2012, SpaceandPeople has acquired a further 112,380 shares in SpaceandPeople India Pvt Ltd, bringing its total shareholding to 677,353 shares, representing 62.51% of the issued share capital.

The fair value of the assets and liabilities of SpaceandPeople India Pvt Ltd recognised as a result of the acquisition are as follows:

	£'000
Cash	284
Property, plant and equipment	28
Receivables	327
Payables	(56)
Net identifiable assets acquired	583
Less fair value of non-controlling interest	(219)
Fair value of assets acquired	364
Fair value of consideration	608
Goodwill	244

Prior to the acquisition of shares on 4 June 2012, the Company carried the investment in SpaceandPeople India Pvt Limited at £156k. The shares in June were acquired for £452k. The total cost and fair value of the consideration of the controlling interest at 30 June 2012 was £608k.

13.        Investment in associates

Details of the Group's associates at the end of the reporting period are as follows:

Name of associate	Principal activity	Place of incorporation and operation	Proportion of ownership interest and voting power held by the Group
SpaceandPeople (Hong Kong) Limited	Dormant	Hong Kong	31 December '12 35.3%	31 December '11 35.3%
SpaceandPeople (India) Limited	Media	India	0%	44.6%

     (Now subsidiary company)

	31 December '12 £'000		31 December '11 £'000
SpaceandPeople (Hong Kong) Limited	-		-
SpaceandPeople (India) Limited	-		156
	-		156

Summarised financial information in respect of the Group's associates is set out below.

		31 December '12		31 December '11
		£'000		£'000
Revenue		-		507
Profit / (loss)		-		68
		31 December '12		31 December '11
		£'000		£'000
Total assets Total liabilities Net assets Group's share of net assets of associates SpaceandPeople (Hong Kong) Limited		- - - -		499 (149) 350 -
SpaceandPeople (India) Limited		-		156
		-		156

14. Other intangible assets

Cost	Website development £'000	Product development £'000	Patents & trademarks £'000	Total £'000
At 31 December 2010	284	137	6	427
Additions	-	-	4	4
At  31 December 2011	284	137	10	431
Additions	-	-	30	30
At 31 December 2012	284	137	40	461

Amortisation	Website development £'000	Product development £'000	Patents & trademarks £'000	Total £'000
At 31 December 2010	247	86	6	339
Charge for the period	27	38	1	66
At  31 December 2011	274	124	7	405
Charge for the period	10	13	13	36
At 31 December 2012	284	137	20	441

Net book value	Website development	Product development	Patents & trademarks	Total
	£'000	£'000	£'000	£'000
At 31 December 2010	37	51	-	88
At  31 December 2011	10	13	3	26
At 31 December 2012	-	-	20	20

15.        Property, plant and equipment

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

Cost	Plant & equipment £'000	Fixture & fittings £'000	Computer equipment £'000	Total £'000
At 31 December 2010	617	217	149	983
Additions	681	8	56	745
At  31 December 2011	1,298	225	205	1,728
Acquired on acquisition Additions	28 319	- 30	- 75	28 424
At 31 December 2012	1,645	255	280	2,180

Depreciation	Plant & equipment	Fixture & fittings	Computer equipment	Total
	£'000	£'000	£'000	£'000
At 31 December 2010	84	106	127	317
Charge for the period	138	30	23	191
At  31 December 2011	222	136	150	508
Charge for the period	256	25	29	310
At 31 December 2012	478	161	179	818

Net book value	Plant & equipment	Fixture & fittings	Computer equipment	Total
	£'000	£'000	£'000	£'000
At 31 December 2010	533	111	22	666
At  31 December 2011	1,076	89	55	1,220
At 31 December 2012	1,167	94	101	1,362

16.        Deferred tax

31 December '12 £'000

31 December '11 £'000

Deferred tax liability:
Accelerated capital allowances			10				10
Movement on deferred tax position:
Opening balance			10				27
Released in the period			-				(17)
Closing balance			10				10

There has been no movement in the deferred tax balance in the year.

17. Trade and other receivables

				31 December '12 £'000					31 December '11 £'000
Trade debtors				3,218					2,419
Other debtors				24					27
Prepayments				400					391
Accrued revenue				197					178
Total				3,839					3,015

The ageing of trade debtors:

	Current £'000		0 - 30 Days £'000		31 - 60 Days £'000		61 Days + £'000		Total £'000
31 December '12	2,135		454		268		361		3,218

31 December '11	909		745		331		434		2,419

18. Cash and cash equivalents

			31 December '12 £'000					31 December '11 £'000
Cash at bank and on hand			2,019					1,433
Bank overdraft			-					(283)
			2,019					1,150

19.        Trade and other payables

			31 December '12 £'000					31 December '11 £'000
Trade creditors			504					479
Other creditors			1,571					1,401
Social Security and other taxes			658					302
Accrued expenses			1,896					1,391
Deferred income			440					646
Trade and other payables			5,069					4,219
Corporation tax			289					246
Total			5,358					4,465

20.        Other borrowings

At 31 December 2012, Retail Profile Holdings Limited had a bank loan of £684,592 (of which £455,004 is included in current liabilities being repayable within 12 months) - See note 21.

				31 December '12 £'000				31 December '11 £'000
Bank overdraft Bank loan				- 455				283 455
				455				738

21.        Non-current liabilities

At 31 December 2012, Retail Profile Holdings Limited had a bank loan of £684,592 (2011: £1,417,718) of which £455,004 is included in current liabilities being repayable within 12 months. The loan is repayable in monthly instalments of £37,917 with interest at a fixed rate of 6.5% on £1,000,000 of the loan, and base rate, subject to a cap of 3%, plus a margin of 3% on the balance. The loan note is secured by a fixed and floating charge over the assets of SpaceandPeople and its subsidiaries.

In addition, as at 31 December 2012, SpaceandPeople plc had drawn down £500,000 (2011: £265,000) of its agreed bank facility of £1,000,000.  The amount drawn is part of a revolving credit facility with repayment due in July 2014.

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 operates a cash-generative business, holds net funds, and has an overdraft facility of £0.5m. The Directors consider the funding structure to be adequate for the Group's current funding requirements.

Borrowing facilities - The Group has an agreed facility of £1m, of which £500k was not utilised at the year end, at a rate of 3.50% over base rate secured by an omnibus guarantee and set off agreement. The facility has not been fully drawn, but improves the financial flexibility of the Group.

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 £1,000,000 at 3.5% above base rate. See note 21 regarding details of outstanding Retail Profile Holdings Limited loan.

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 hedges the position where appropriate. In addition, the Group has investments in a subsidiary in India.

23.        Operating lease commitments

At the period end date, SpaceandPeople plc had outstanding commitments for future lease payments which fall due as follows:

				31 December '12 £'000				31 December '11 £'000
Within 1 year Between 2 and 5 years inclusive				2,253 3,534				2,294 3,825
Greater than 5 years				-				41

24.        Called up share capital

Allotted,  issued and fully paid			31 December '12	31 December '11
Class	Nominal value
Ordinary	1p	£	194,581	194,311
		Number	19,458,063	19,431,063

27,000 shares were issued in the year as part of the exercise of share options.

25.       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.

26.        Earnings per share      

	12 months to 31 December '12 Pence per share	12 months to 31 December '11 Pence per share
Basic earnings per share Before non-recurring costs After non-recurring costs	8.50 8.50	6.49 6.13
Diluted earnings per share Before non-recurring costs After non-recurring costs	7.78 7.78	6.09 5.75

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 31 December '12 £'000	12 months to 31 December '11 £'000
Profit after tax for the period excluding non-recurring costs attributable to owners of the Company	1,654	1,261
Profit after tax for the period including non-recurring costs attributable to owners of the Company	1,654	1,191
	12 months to 31 December '12 '000	14 months to 31 December '11 '000
Weighted average number of ordinary shares for the purposes of basic earnings per share	19,440	19,431

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 31 December '12 £'000	12 months to 31 December '11 £'000
Profit after tax for the period excluding non-recurring costs attributable to owners of the Company	1,654	1,261
Profit after tax for the period including non-recurring costs attributable to owners of the Company	1,654	1,191
	12 months to 31 December '12 '000	12 months to 31 December '11 '000
Weighted average number of ordinary shares for the purposes of diluted earnings per share	21,271	20,712

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 31 December '12 '000	12 months to 31 December '11 '000
Weighted average number of shares in issue during the period	19,440	19,431
Weighted average number of ordinary shares used in the calculation of basic earnings per share deemed to be issued for no consideration in respect of employee options	1,831	1,281
Weighted average number of ordinary shares used in the calculation of diluted earnings per share	21,271	20,712

27.        Share options

The Group has established a share option scheme under which the maximum number of ordinary shares exercisable that can be granted is restricted to such number of shares the aggregate market value of which cannot exceed £120,000 per employee at the date of grant.  Senior executives and certain eligible employees are entitled to participate in the scheme 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 1,983,076 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
5 September 2006		25,000		5 September 2009 - 5 September 2013		65p
30 October 2006		20,500		30 October 2009 - 29 October 2013		75p
16 January 2008		11,611		16 January 2011 - 15 January 2015		155p
14 January 2009		28,000		14 January 2012 - 13 January 2016		50p
1 June 2009		12,307		1 June 2012 - 30 May 2015		65p
22 October 2009		386,998		1 November 2012 - 31 October 2013		88.6p
22 October 2009		113,002		1 November 2013 - 31 October 2014		88.6p
21 May 2010		276,328		1 November 2013 - 31 October 2014		88.6p
21 May 2010		389,330		1 November 2014 - 31 October 2015		88.6p
27 March 2012		720,000		27 March 2015 - 27 March 2022		70p

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

	12 months to 31 December '12 '000			12 months to 31 December '11 '000
Number of options outstanding as at the beginning of the period			1,281,076		1,281,076
Granted			730,000		-
Exercised			(27,000)		-
Forfeited			(1,000)		-
Number of options outstanding as at the end of the period			1,983,076		1,281,076

In total, 1,983,076 options were outstanding at 31 December 2012 (1,281,076 at 31 December 2011) with a weighted average exercise price of 81.1p (86.9p at 31 December 2011).  Of these, 484,416 were exercisable (71,111 at 31 December 2011) with a weighted average exercise price of 85.6p (79.7p at 31 December 2011).

The Black Scholes model was used to obtain the fair value of the share options. The main assumptions made were as follows:

Average option price                                                                                           81.1p

Average market price at grant of option                                                         70.0p

Expected volatility                                                                                                               12.9%

Average expected vesting period from 31.12.12                                                             6.5 years

Risk free rate                                                                                                        1%

Dividend yield                                                                                                      4.57%

The expected volatility was determined by calculating the historical volatility of the Company's share price over the last year.

Based on these assumptions, the average fair value per option was 1.11p (0.24p at 31 December 2011). The performance related conditions in respect of the 1,885,658 options that are subject to such conditions have been reflected by adjusting the number of options expected to vest based on the likelihood of the performance criteria being met. This reduces the average fair value per option to 0.85p.

The total share-based payment charge for the year, calculated in accordance with IFRS2 on share based payments, was £19,426.

 

END

 

 

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