LONDON (ShareCast) - (Sharecast News) - Promotional and brand experience company SpaceandPeople said on Thursday that trading in the second half of 2020 remained "extremely challenging", as further lockdowns in the UK and Germany affected its ability to operate during what is normally the more profitable period of the year.

The AIM-traded firm said the continued closure of venues led it needing to credit and refund a significant amount of revenue that had already been recognised in previous years, and which would not ordinarily have been refundable were it not for the unprecedented closure of venues due to Covid-19.

It also led to the need for substantial credits in relation to revenue recognised for bookings that were expected to continue past year-end.

As a result, the audit committee recommended, and the board agreed, to change the group's revenue recognition policy around promotional bookings, where revenue would now only be recognised in the period in which the activity took place.

"Historically, promotional revenue was recognised at the point at which a booking was contracted," the board explained in its statement.

"This change brings the policy for promotional bookings in line with the revenue recognition policy applied by the retail segments of the group."

Under that revised policy, the unaudited consolidated loss before tax for 2020 was expected to be around £2.5m, swinging from a profit of £0.1m in 2019.

The change in policy had the effect of reducing the loss before tax by £0.6m, due to the exclusion of post year-end revenue being more than offset by the adjustment made to include bookings that had previously been recognised in the prior year.

As at 31 December, the group had cash of £0.8m, with £1.8m of drawn bank facilities and undrawn bank facilities of £0.5m.

Since 31 December, and as it reported on 29 January, group borrowings were refinanced and an additional £0.5m of bank facilities was agreed.

"With lockdowns in both the UK and Germany extending beyond our year end, trading has continued to be severely affected through the first quarter," the board said in its statement.

"However, the group has made good progress in securing a number of prestigious new venues in the last six months, increasing the range of venues and enhancing SpaceandPeople's position in the market."

SpaceandPeople said the proposed reopening dates for non-essential retail in the UK in April had allowed it to start planning for a return to trading, with new bookings again being made.

"Given the level of enquiries and proposals the group is currently seeing, the board is optimistic that SpaceandPeople will recover quickly, both in terms of the group's pre-existing portfolio of venues and the new venues added to the portfolio during the past six months."

At 1150 GMT, shares in SpaceandPeople were down 14.5% at 8.55p.

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