On 13 March, CEO Paul Gillespie sold around 2m shares on-market at roughly A$0.44 cps. This equates to about 25% of his direct individual holding at the time of the trade.

With the share price trading close to all time high levels, I am not too alarmed by this.

This article by the Verge is a good read, relating to GM-backed robotaxis in California having their permits suspended due to the amount of problems they are causing.

Driverless vehicles are something I monitor with the Smart Parking thesis -- and will continue to do so -- but I don't think we are anywhere near having a decent portion of driverless vehicles operate. The issues being experienced in California reflect this to an extent.

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.

Non-Executive Director Fiona Pearse recently bought some shares on market, totalling $38,000. Fiona now holds 783,000 SPZ shares, having previously held 613,000.

Fiona has extensive commercial and financial expertise gained from a long career at global companies BHP and BlueScope Steel. She has had a position on the board since 2019, so she knows the business well.

Always good to see some insider buying following some share price weakness.

Thanks @Strawman. I really enjoyed this meeting. First of all, let me start by saying I am a fan of management; they are doing a great job. Paul in particular has turned around what was once an unfavourable business with lots of problems in the UK. They really appear to be hitting their stride now. 

I found both transparent, no bullshit -- even if Paul's initial pitch was very scripted. When @Strawman started to prod, both loosened up a little and this is where the meeting got interesting. The elaboration into their business model was fascinating. A lot of this I had obviously come across before, but there were bits and pieces that were new to me -- even as an investor in SPZ for the last few years.

Some of my notes are recorded below:

Business model expanded

Smart Parking will approach sites and offer them their services. For a business, this is normally beneficial -- it frees up parking for genuine customers/members. For shopping centres and the like, this should in turn enhance customer satisfaction and bring more shoppers through the door -- you are much more likely to shop when you can find a convenient park outside. The real benefit for the site owners is Smart Parking own the product and take on all the CapEx costs. The business won't have to pay Smark Parking a fee, nor do they get lumped with installation, signage fees etc. As I understand it, the site owners pay nothing. In fact, the business will normally get to keep the parking fees from the parking machines and the like. The catch for Smart Parking is they will typically take all the revenues obtained from PBNs associated with the sites. In more competitive markets (some areas of the UK), Smart Parking might reach an agreement to take a certain cut of the revenues. You can see how the business are able to bring site owners onboard. In the majority of cases you would expect it is a no brainer for them -- more regulated parking spaces, enhanced foot traffic and on top of that parking revenue -- all for no outlay! For Smart Parking, they don't have to pay the overheads associated with the parking sites, only the small CapEx costs associated with their technology, sensors and the like. This reduces a lot of the usual significant costs for SPZ and enables them to be incredibly 'capital light'. That is a great business model. A win/win for both site owners and Smart Parking. 

Cost structure

A typical site installation costs somewhere around 8000-10,000 pounds. The business tends to recap CapEx investment after approximately 7-9 months of running the site, with minimal costs incurred from this point onwards. 

A typical site will issue around 80 tickets (breaches) per month, at an average of £31.50 per ticket. It costs around 5 dollars per ticket to source the drivers details (name, address etc), print and then post the ticket. This fee is cheaper in NZ, but more expensive in Australia.

The average contract term with new sites is three years.

Churn is often initiated from SPZ's end -- the company might not be making the money it wants, or the margins might not be competitive enough, so they are often prepared to walk away. For instance, SPZ lost 40 sites in H1 FY22 due to a margin battle. This isn't the end of the world for the company. They can simply use the technology elsewhere, but management stress it is also not a CapEx holiday. They still have to organise the signage, staff to install etc. I like the fact they are prepared to cut losses on investments deemed too difficult or surplus to requirements. Even if this impacts sites under management (short term). They really seem focused on shareholder return here. 

Fines

• Collection rates: in the UK, tickets are 100 pounds. If paid within 14 days this gets reduced to 60 pounds. The fine is referred to a debt collection agency after 28 days, whereby the fine increases to 170 pounds. SPZ retain 130 pounds of this.
• Ticket average: of 100 tickets, 15-18 are cancelled for whatever reason - appeal, actual customer etc. 55 out of 100 would actually result in fines. This is where SPZ make the bulk of their revenue. 

Competition

Management acknowledged their competition, but noted their technology was the key differentiator in most markets -- essentially their moat. This is the case in the Australian and German markets in particular -- especially the latter. While there is other competitors, they lack the technology of SPZ or the money to implement similar technology.

Thanks again for hosting @Strawman.

Highlights

• Revenue 38.1m, an increase of 68%
• Total sites under management: 839 – an increase of 36%
• Parking breach notices increased by 81%, largely due to increased sites under management and recovery from Covid restrictions.
• Cash holdings 10.8m
• Inflow from operating activities – 10.1m, an increase on last year’s 7m.
• Free cash flow of 8.1m, an increase of 624%
• FY22 was profitable for the business, with NPAT coming in just under 1m. This is a decrease on last year due to a one-off VAT payment, which bolstered FY21 earnings.

I still need to do a more thorough deep dive on this one, but it looks to have been another impressive year for one my highest conviction holdings. Management has done remarkably well in managing the business during a tough period. While many parking operators struggle, Smart Parking is now a stronger, more resilient business than it was 24 months ago.

We are also starting to see some scaling take place. Essentially we have seen revenue increase by around 16m, while other costs (excluding D&A) increased by around 3.5m:

• Materials/consumables: increase of 500k
• Employee expense: increase of 2.7m
• Depreciation/amortisation: increase of 900k
• Rental/lease costs: Increase of 170k

The business doesn’t shy away from increasing overheads either, noting a ‘51% increase’ in their investor presentation. But with a gross margin of 60%> and the business seemingly using its cash well, I worry very little about an increase in costs when revenue is outpacing that increase by more than 4x.

When you consider they are trying to break into new markets in Germany, Australia, and New Zealand, the costs look even more impressive. And pleasingly, they are funding this growth themselves without having to tap shareholders on the shoulder. And for an added bonus, New Zealand is already operating cash flow positive despite only recently entering this market.

In short, this is a capital light business that requires minimal maintenance CapEx to fund operating activities. This is starting to reflect in their financials. My confidence continues to grow as a result. I will update my valuation in the coming weeks.

FY23 outlook

• The business provided an update re: early FY23 activity, with 878 sites as of 22 August.
• They have also set some targets: 80 Australian sites, 75 NZ sites and 70 German sites by June 2023.
• They believe the current market in Germany is very manual/employee orientated. SPZ's tech-led solutions should provide them with a competitive advantage in this market, and result in additional client wins.
• Scope for further accretive acquisitions -- which seems pragmatic given their strong balance sheet and history of sensible acquisitions.
• They expect further profitable growth in the coming FY.

@Wini released a blog post about Smart Parking yesterday (27 June) -- link here.

The post provides a compelling 'bull case' for the business, while also highlighting key risks. I encourage those with an interest in the business to give it a read.

@Wini hopefully you are OK with this being posted here. Sing out if you aren't and I can remove the post. :-)

We weren't provided with any revenue or profit figures, but still get some insight into SPZ's H2 period.  

- Parking breach notices (PBN) are forecast to increase by around 70% vs PCP. While this figure hasn’t moved much since the H1 increase, it marks a strong year for SPZ. Q3 was the slowest quarter of the year for PBNs issued, while Q4 is forecast to be an improved one (second highest).

- Sites under management was recorded at 816 (as at 31 May), an increase of 32% PCP. A total of 99 sites have been added thus far in H2, noting June figures still need to be added. A breakdown based on region (and churn) is recorded below. While total sites under management (99) wasn’t anywhere near as high as H1 (176), churn in H2 has been much more respectable – 20 in H2 vs 58 in H1.

- 42 sites are now up and running in the APAC region, while the sales team was doubled to ‘capitalise on market opportunity’. If my calculations are correct, total sites under management has effectively doubled in H2 (from 21 to 42). PBNs in the region continues to trend upwards nicely (below).

- As for their push into Germany, four customer contracts were signed, with two locations live and generating revenue. 0.5m OPEX costs for the half suggests they aren’t throwing lots of money down the drain as they try and shift into a new market. This is obviously pleasing in this current environment. 

Smart Parking continues to be one of my higher conviction holdings. Pending the release of the FY result (where I will have a proper dig into the financials) SPZ is high on my 'top up' list at the moment. They continue to grow at impressive levels, they are profitable (based on H1 reporting) and have a solid balance sheet -- the latter provides them with stability and an ability to fund their growth strategy inhouse. They aren't impacted by supply shortages and are in a good position to make strategic acquisitions when the opportunity arises. Provided the FY report reflects more of the same, management continue to demonstrate that they are solid capital managers.

@Noddy74, any differing thoughts?

Catching up on earnings, starting with Smart Parking. 

I will try not to repeat @Noddy74’s recent straw as this does a great job of summarising H1 FY22. It all looks positive to me with the exception of stalling operating sites, but it’s pleasing to see operating sites have already seen an uptick in Q3 FY22. In addition, I like the fact management aren’t scared to highlight and address what may be seen as limitations in the reporting period. There isn’t much bullshit with them – and I think that goes a long way to getting shareholders onside, particularly noting past issues that have plagued SPZ. 

To perhaps take this back a step, what am I looking for as SPZ continues to expand into new markets? 

- costs under control 

- evidence of scale

- strong performances in main market/s to support growth elsewhere 

SPZ key metrics -- H1

- Revenue and EBITDA both ahead of guidance -- 17.3m and 5.1m respectively. 

- Gross profit almost doubled, demonstrating scale. It is excellent to see material revenue increase not resulting in ridiculous increases in cost. We are also continuing to see an increase in operating leverage – EBITDA margins have steadily increased since FY20 yet costs continue to decline. The latter is a real testament to management. 

- Sites under operation has stalled since the last reporting period, but still up 19% vs pcp. Noddy addressed this in his straw – no issues here and management have reported an increase to sites in Q3 (to 772 as at Feb 2022)

- cash holdings of 11.3m with no debt – well placed to expand operations into Aus, NZ and Germany and make sensible acquisitions should the opportunity present itself. Also pleasing to see more cash reserves since 2021 despite SPZ undertaking a share buy back. 

- Parking breach notices well up on last year, demonstrating the post-pandemic ‘turnaround’ play – more cars on the road (and with that a requirement to park) resulting in more revenue for SPZ. 

- Expansion into NZ and Australia is tracking along nicely. The former is already profitable having acquired its first customers in March 2021, and management suspect Australia will be EBITDA profitable in H2 FY22. That is bloody impressive. The movement into Germany is new for SPZ, but as Europe’s largest population, should they gain traction in this market it will be significant for the company.  

EPS is positive – 0.6 compared with last year’s (0.41). In addition growth margins are up slightly to 71% (from 65%). This is fundamentally a more efficient and profitable business than it was 12 months ago. The thesis continues to play out here – the business is profitable, has no debt and continues to expand its operations into new markets at scale. Based on these factors, I think this is largely why SPZ was somewhat protected by the recent sell off. There were no ridiculous multiples or valuations to be seen here – just a solid, well-ran company that continues to fly under the radar.

I keep tabs on the same @Noddy74. I also monitor the use of vehicles (vs other forms of transport) and as expected, statistics suggest UK residents are less inclined to use public transport at the moment - with use well below what the UK was experiencing pre-covid. As it stands, vehicles are the most common form of transportation in the UK by some distance. This wasn't previously the case and obviously bodes well for Smart Parking.

Q1 FY22 Business Update

A great quarter for SPZ as expected – this company is increasingly looking very cheap to me at these levels. I have spoken quite extensively on this site about SPZ, but in my opinion this is the best set of results released by the company in a 24-month period. The announcement can be located here.

The results in a snapshot

• Revenue up 62% on PCP
• Total sites under management up 19%, to 738
• Parking breach notices up 54%, which is probably the most important metric here given its where SPZ earns the majority of its profits
• Free cash flow of 2.6m, a great result. SPZ is well on the way to posting a profit (again) in FY22
• Cash holdings look nice and healthy, with 10.9m in the bank.
• All time record margins recorded in Q1, at 30%.
• NZ expansion was impacted following lockdowns associated with the pandemic. This resulted in only one site being installed, an increase of 10 to 11. SPZ has set a target to achieve 75 sites under management by June 2023.
• Sites across Australia, where SPZ is also trying to expand, rose from 3 to 6.  

I posted a Straw a few weeks ago noting that my conviction was growing. Q1 was a cracker so my thoughts remain unchanged – I am very bullish on SPZ. Perhaps most encouraging is Australia and NZ – where SPZ is expanding into – were both difficult markets to target in Q1 due to lockdowns. As both countries start to lift restrictions SPZ is well placed to continue their expansion into both markets, particularly with the cash they have on hand. They are also well capitalised to fund further acquisition opportunities in both countries.

On another note, SPZ was discussed on The Call yesterday, by none other than our very own @Wini, alongside Ben Clark (a cracker of a panel, btw!). I was surprised to hear SPZ mentioned given it normally flies under the radar. Shout out to the caller (Phil) for asking the panel. Pleasingly both Ben and Wini gave it a buy!

DISC: HELD

A market analysis report was recently released on Grand View Research which focuses on the smart parking industry. A few takeaways from the report: 

• The global smart parking systems market size was estimated at USD 4.42 billion in 2020. It is expected to grow at a compound annual growth rate of 21.5% from 2021 to 2028 to reach USD 19.29 billion by 2028.
• A short term decline due to the pandemic has impacted smart parking. However, post pandemic, people are expected to use their vehicles for solo travel and avoid shared mobility, including public transportation. This is expected to fuel traffic congestion in numerous metro cities across the globe. The increase in traffic congestion is expected to propel the demand for smart parking solutions over the forecast period.

While it mainly pertains to the US market, it is still an interesting read for those interested in the smart parking and analytics industry. I particularly agree with the analysis re: car travel tailwinds over the next few years. The report can be located here. 

A quick recap

SPZ is a bit of a ‘turnaround’ story for me. The business has had issues in the past and were rightly punished by the market over several years, to the stage where they were oversold – with a 20-million revenue business dropping to as little as 10c. Yes, most turnaround stories don’t go the way we would hope as investors, but there were never structural issues here – their dilemmas mainly stemmed from poor decisions at mid/high-level management. They replaced various division heads and they have steadily shown signs of improvement. And then along came Covid-19… 

SPZ’s business model was hammered during the pandemic. Most of their business is in the UK and most of their revenue comes from enforcement and parking-related fines. Seven months of UK lockdowns and the rug was well and truly pulled out from under them. But the business demonstrated impressive resilience and pulled through. Impressively, they made a profit last year by cutting costs and through a somewhat fortunate one-off VAT payment – despite a slight revenue decline. 

The business continued to grow during the pandemic; sites under management from 496 to 619 from FY20 to FY21. Unlike FY21, UK restrictions have now been relaxed, resulting in people returning to their everyday lives – and more importantly cars being back on the roads / requiring parking. 

Recent company updates

The recent reporting released by SPZ provides a few indicators into how the company is tracking in FY22. I like what I am seeing: 

• FY22 has seen sites under management increase to 737 (as of 30 Sep 21), both the result of an acquisition and organic growth. This is already almost 20% growth from FY21 figures in Q1 alone. The business is targeting 1000 sites by June 2023. This figure was initially deemed a little optimistic but to their credit they are tracking along well. 
• The company has an existing order book of 3.3m, including Gatwick airport installations (deferred from Covid-19) and new sites in Australia and NZ. The latter also demonstrates SPZ’s expansion into the Australasian market is occurring quicker than initially anticipated. 
• What I found most impressive was the company issuing a record 48,227 parking breach notices in August 2021 (compared with 33,436 in August 2020 and 26,465 in August 2019). As indicated, this is the main revenue driver for the business. Further, it demonstrates people are getting on with their lives post-pandemic; it bodes well for SPZ and other business in the UK. 

They persevered during Covid and continued to increase sites under management while keeping the lights on. Their healthy balance sheet, like many, was fundamental to their survival. While many were reducing staff and applying for government grants during Covid-19, SPZ were completing a share buyback at around the 17c levels! The aftermath of the pandemic (in the UK) has arguably created some acquisition opportunities given many smaller businesses haven’t fared so well. Their recent acquisition in August 2021 appears to have been a good one, and with 10 million in cash holdings I expect the business will continue to look for strategic acquisitions in the short to medium term. 

My conviction is growing. I forecast significant increases to revenue in Q1 and Q2 FY22, provided the business continues on its current growth trajectory and the UK remains out of lockdown. I will be looking to add at these levels and think SPZ is flying under the radar. 

DISC: HELD

Edit - spelling

FY21 Results

Highlights 

•    5.3 million profit
•    Total sites under management (where SPZ has parking technology installed) increased to 619. A total of 123 sites were added in FY21, an increase of 25% YoY. 
•    Revenue reported at 20.7 million, a slight decrease from FY20 figures (21.5 million). More on this below. 
•    Completed acquisition of Enterprise Parking Solutions, with 68 new sites (see my previous Straw). 
•    278% increase in growth in parking breach notices. 
•    Cash reserves of 10.7 million  

All things considering, FY21 was a decent year for SPZ. Despite the decrease in revenue (which was expected due to the pandemic severely impacting operations in the UK – SPZ’s primary market), the company posted a 5.3 million profit. This was largely due to the reduction in overheads, which decreased from 13.1 to 10.5 million, in addition to a one-off benefit due to a VAT resolution/dispute.

Expansion in the NZ market appears to be progressing well. This is an attractive market with a large number of site opportunities. SPZ has acquired access to NZ’s national car owner numberplate database, which provides the company with the ability to deploy remote camera technology and more. A total of 10 sites currently under management in the NZ market (March Launch) – performing ahead of expectations. Nevertheless, I want to see gradual expansion in NZ QoQ, something I think the company can achieve. 

Similar to NZ, I am looking forward to seeing how SPZ expand throughout Australia in FY22 (where there are three sites currently installed). Having started in Qld, SPZ’s strategy is to pursue expanding operations into WA, SA and NT due to the regulatory environment in those states. I think the company is well placed to disrupt this market. Another bonus is these states/territories haven’t been impacted by the pandemic (to the extent of NSW and Vic), so this bodes well for SPZ’s strategy heading into FY22. 

The company reported 720 total sites under management as of 20 August 2021 – the company is on track to meet their goal of 1000 sites by June 2023. There has been some nice growth in FY22 thus far (both from an acquisition and organic), so FY22 figures are looking healthy already. 

There are some notable risks heading into the year though, specifically the pandemic. Lockdowns have a negative impact on the company. Any extended lockdown in particular will impact SPZ’s growth strategy. 

Mr Market likes the result – SPZ are up 10% today at the time of writing. I think this is primarily due to the tailwinds looking into FY22. With a healthy balance sheet, SPZ is well placed to expand their operations into NZ and Australia.

Smart Parking acquires Enterprise Parking Solutions (EPS)

SPZ has acquired EPS – a profitable and cash flow positive UK parking management business – for a total of $1.54m. The purchase has been funded entirely from existing cash reserves.

SPZ noted in H2 FY21 that it would look to make strategic acquisitions where the price was right, particularly with the impact of the pandemic on smaller business. This looks to be a shrewd bit of business - noting that full details are yet to be released. The company have stated that they shouldn’t have any issue integrating EPS to its back office system, which seems fair enough given the similarities between the two.  

The acquisition will include EPS’ 68 sites under management. This accelerates SPZ’s growth to its target of 1000 sites under management by June 2023 – with this total now standing at 693. SPZ initially reported 612 sites in its H2 FY21 update, so without the acquisition sites under management would have increased by 13 since June 2021.

Other tailwinds for SPZ

• UK is out of lockdown, where the bulk of SPZ’s business is.
• General preference to use personal transport (driving), as opposed to public transport, during and after the pandemic.
• No barriers for SPZ to continue its gradual expansion into NZ, which remains largely unaffected by the pandemic.

I still consider this one a bit of a sleeper – it can be a slow burn at times, but I have maintained a long term focus (which has seen me be rewarded in recent months). I still think there is some upside here.

SPZ received acquisition offers/interest a few years ago (which were all turned down), including a 28.4c-per-share offer from British car park manager Parking Eye. It wouldn’t surprise me if additional takeover offers are received in the future, particularly with SPZ anticipated to become profitable in the next 12 months or so.

Additionally Microequities Asset Management have established a sizeable position in SPZ this year, purchasing in March 2021, and adding to its holdings in early June and late June 2021. I think this is a good show of support if anything. 

Full year results should be released in the next month. A few things I will be looking closely for:

• How growth/expansion is going in NZ
• Cashburn over the last year, with the acquisition cost included.
• Forecasts around when the company will become profitable.

DISC: I hold in RL portfolio. I won't be looking to take any profits off the table here and will instead let this one (hopefully) run. 

Following movement to Smart Parking’s (SPZ) share price in the last month, I figured now would be a good time to post a straw and share a few thoughts about my interest in the company and thesis.

Overview

SPZ is a global company concerned with the sale of technology, hardware, and software for parking solutions. Some of their technology consists of automatic number plate recognition, digital guidance signage and in-ground occupancy sensors. There is also an R&D component to the business (to ensure they can continue to develop innovative parking solutions). They operate in 17 countries and have offices in Australia, NZ, and the UK.

Their target customers include shopping centres, hospitals, supermarkets, airports, commercial parking sites, universities, and large-scale municipal street environments. Gatwick Airport – UK’s second largest airport – is an example of a reputable/prominent customer. More information on this here.

Like many industries, the pandemic has had a significant impact on SPZ – which relies on vehicle use, subsequent parking, and parking breaches/fines. Fortunately for the company and shareholders SPZ is showing signs of recovery, with revenues increasing again and delayed projects resuming.

As a company, SPZ is not particularly ‘sexy’. The share has traditionally traded with limited interest or trading volume. I think it was Noddy who recently mentioned they really like when companies, particularly those with self-declared conviction, continue to meet corporate objectives and grow – but do so relatively unnoticed. SPZ is a similar story for me in the last 3 years.

Thesis

• Management have steadily grown the business over several years, achieving continued expansion and growth in ‘sites under management’ (SPZ’s key metric – parking facilities where technology has been installed).
• In the last two company updates SPZ reported technology rolling out at 85 and 123 sites respectively, with removal of tech occurring at 5 and 13 sites. As of 31 May 2021, they were operating at 612 sites in total, up 23% from the previous year. SPZ is installing technology (and maintaining customers) at a much higher rate than removal/customer churn is occurring.  
• SPZ have recently rolled out operations in NZ, with 6 sites installed (performing ahead of expectations).
• Growth tailwinds for the ‘smart’ parking industry: with real estate and parking becoming increasingly more expensive, I think their is merit in businesses wanting to better manage and monitor parking using identification technology. This assists with monitoring consumer trends and movement and facilitates enhanced accountability/enforcement for fines etc. Other tailwinds for the industry include:   
  • further easing of restrictions.
  • growing vaccination rates across UK and other markets adding to consumer confidence.
  • ‘staycations’ in the UK and other markets encouraging driver motorist behaviour.
  • continued expansion in NZ and AUS.  
• In the last reporting period, the company reported cash holdings of 9.3 million. They are unlikely to need additional capital over the next 12 months. The company also commenced a share buy back in Feb 2021, with 1 million bought back thus far – however yet to scratch the surface of their proposed 5m.
• Lots of insider buying in the last 6 months, with no selling recorded (Simply Wall St). Microequities Asset Management recently purchased over $2million worth of shares (split across June and March 2021) at 0.17c.
• Experienced management team and BOD, led by Paul Gillespie who has been CEO since 2013. Insider ownership is recorded at 7% according to Simply Wall St.  

Monitor

• I want to see sites under management continue to tick along at growth rates around 15%>, with removal of tech occurring <15% mark – achieving this confirms customer retention/stickiness and suggests continued value in their product.
• The NZ and Australian markets are significant growth opportunities for SPZ – continued expansion in both countries is important for the thesis to remain intact.
• Cash burn rate - history of churning through cash quickly, particularly last year. 
• The last reporting period was impressive, with net profit increasing to 4.5 million (compared to 1.5 million in previous reporting period). This result is a little misleading and due to a one-off benefit of 6.9 million relating to a VAT dispute.

Risks

• SPZ is still unprofitable. This is likely to remain the case for another 12 months.
• They are highly vulnerable to any lockdown measures. Any extended lockdown period, particularly in the UK, will have a significant impact on SPZ’s growth trajectory.
• Finico owns 33% of the company (Simply Wall St) – removing/selling a large portion of their position would put SPZ’s share price under considerable pressure.

Disclaimer, hold in RL portfolio – purchased a small holding at 12c.