Another excellent year for Smart Parking with all key metrics moving in the direction we want to see. Revenue came in slightly ahead of my forecast, but perhaps most impressively net income was double what I forecasted, primarily due to gross margin increasing.

Highlights

• Revenue of 45.1m, an increase of 21%, above my forecast of 43m
• Cash inflow of 9.2m, just below my forecast of 10.5m
• Adjusted EBITDA 11.5m, up 35%
• Adjusted EBITDA margin, up 25.5%
• Net income of 6.7m, around double my forecast of 3.3m
• Sites under management (the estate) grew 33% from 839 to 1112. This is a CAGR of 31% since 2018.
• More than 800k spent on share buybacks during the year – 3m shares – at an average price of 0.22c.
• Cash of 10.7m – bloody impressive considering a recent acquisition, continued investment in Germany and share buy backs throughout the year.
• New Zealand deserves a special mention – sites increased to 84 (320% pcp) growth in breach notices increased 258%, with revenue just under 3m – noting all are off a low base this is really impressive for what is still a reasonably new market.
• Qld market remains in a holding state pending a review around regulation.
• 1.3m debt – manageable and not a concern.   

Re: their expansion into Germany – this remains in capex/investment stage. In the call management indicated they are starting to invest more aggressively in this market due to the opportunities/pipeline and large area they can cover. Will be interesting what lies ahead for Germany in FY24; this has the potential to be a hugely profitable market for Smart Parking.  

To elaborate on the increase in gross margin, this is the result of new sites following the initial period of investment – a great example of operating leverage, demonstrating just how attractive this business model is when operating under a regulative-friendly framework.

Outlook

• Unless I misheard, re: new sites under management from the recent German acquisition – they are hoping to convert 2/3 of these to ANPR technology.  
• Some interesting discussion around regulation in the UK on the call, specifically the establishment of a code of practice which remains ongoing. They don't expect any decision in FY24. This is by far and away SPZ's key market, and any regulation changes will have a significant impact (positive or negative) on the business. Management did emphasise that this is very different to Qld – UK is more concerned with establishing a code of practice to govern those that already exist; they are far more open to parking regulation and the requirement/reason for operators to function (unlike Qld which removed the ability of parking operators to access data altogether). Both NZ and Germany for instance already have established a code of practice, but this remains one to watch closely and is a key risk for the business. @Noddy74 @Wini @Byrnesty and others -- anything else to add that I missed or any disagreements?
• They will continue to focus on growth in core markets moving into FY24 – UK, Germany and NZ – both through organic growth and attractive acquisition opportunities.
• During the call management mentioned they are looking to enter new markets in FY24 (most likely in northern Europe) – but have lots of work to do and still in the research stage. They note they need to find the right leader, people and market and need to get that right – refreshing to hear but they need to be cautious not to overdo it, particularly with lots of work to do in Germany and plenty of growth ahead of them still in NZ, the UK and to a lesser extent Australia. This is another risk; we don’t want them biting off more than they can chew, particularly with the business currently performing so well.

I will update my valuation in the coming days – @Byrnesty with operating leverage starting to come through and net income coming in much higher than I expected, I am guessing my DCF will reflect an increased company value. I still think a large discount is required until we know more about the regulation risks in the UK.