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SpaceandPeople – shares soar on the positive guidance of a trading update

By Steve Moore | Thursday 11 May 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Shares in promotional space manager and services provider SpaceandPeople (SAL) are currently 45% higher today, at 37p, on the back of a “Trading Update” announcement.

This commences that “revenue and profit before tax for the first four months of 2017 were ahead of management expectations as a result of strong sales in the Group's UK promotions division in particular”. Additionally, the company “has successfully renegotiated the terms of the German retail division's contract with ECE”, with a resulting reduction in rental costs, and there is also “positive impact of the restructuring carried out in 2016”.

The result is that “the board now anticipates profit before taxation for the financial year ending 31 December 2017 will be approximately £1.1 million and Basic EPS will be approximately 4.5 pence… expects net cash… to be approximately £1.25 million”.

Firstly, credit for providing such guidance. It is guidance which also suggests the shares still good value, with a market cap of £7.2 million.

However, I also note that “revenue across the business remains weighted towards the second half of the year” (though “the board is confident that the strong start to 2017 will be maintained throughout the year”) and that the noted restructuring was carried out amidst a profit warning and loss-infested 2016. As such, I’d want some further, consistent, delivery from here before having sufficient comfort to consider a purchase - and thus, for now, track from the watchlist.

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