Smart Parking Limited (SPZ) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Annual General Meeting of Smart Parking. Obviously, a little bit different this year because of COVID, and so we're having a virtual AGM. I'm Chris Morris. I'm the Chairman of Smart Parking, and I'll be chairing the meeting today. I'd like to introduce you to my follow directors and company secretary who are present at the meeting. Paul -- just wave when I mention your name, Paul. Yes, that's him, right. Tiffany, yes, Tiffany's there. Jeremy, he's there. And Fiona is with Paul, right. And Mr. Richard Ludbrook, our CFO and Company Secretary, who is in New Zealand. Most of the others are in Melbourne. There's a few shareholders. I see Mr. [ Cohn ] there from New York in lockdown. I don't know where everyone else comes from. And also, I'd like to welcome the company's auditors, Grant Thornton, to the meeting. I advise that the meeting -- that there's a quorum present. Therefore, the meeting is properly constituted, and I declare the meeting open at 12:03. Okay, you should be able to see now the presentation on your screen. Now if shareholders wish to ask questions during the meeting, I confirm that there will be an opportunity before putting any resolutions to the meeting to ask questions to the Board as they relate to the formal items of the business of this meeting. [Operator Instructions] All questions in the first instance are directed to me as Chair. Please note that while you can submit questions from now on, I will address all questions at the same time as the relevant stage of the meeting, which will be after all the items of business and proxy positions have been presented. The Notice of Meeting contains details of how to vote and is also shown on the screen. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At the time, if you are eligible to vote at the meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You do, however, have to -- have the ability to change your vote up until the meeting closes. I now declare voting open on all items of business. The polling icon will soon appear. Please submit your votes at any time during the meeting. I've instructed Computershare to keep the voting open until the conclusion of the Managing Director's, Paul Gillespie's, business update, which -- when the poll will close. Following the meeting, the votes will be compiled by Computershare and released to the ASX later today. I now declare voting open on all items of business. Proxies, please refer to your screen for a summary of the proxy votes received for each resolution. Where a valid proxy vote has been given to the Chairman without voting instructions, please note, in all cases, I intend to vote in favor of the resolution. Information to access the Notice of Meeting and explanatory notes dated 16 October 2020 was distributed to all shareholders, and I'll take that notice as read. All resolutions contained in the Notice of Meeting, and to be put to members today, will be displayed on the screen, so I will not read out each proposed resolution. We will now move into resolution 1. Let's give a little bit of time for everyone to read it that hasn't. You can see the resolution terms and proxy votes for resolution 1 and shown on the screen. Is there any questions to this resolution? Okay. And Richard? No, no question for that. I now put the resolution to a vote. [Voting]

Resolution 2, allocation of equity to managing director under employee share plan. The resolution terms and proxy votes for resolution 2 are shown on the screen. Any questions for that one, Richard?

No questions.

No questions. I now put the resolution to a vote. [Voting]

Resolution 3, approval of 10% placement capacity. The resolution and terms of the proxy votes for resolution 3 are shown on the screen. Are there any questions for this resolution?

No questions.

All right. I put this resolution to a vote. [Voting]

I will now hand over to Fiona to chair this resolution as it involves my reelection.

Thanks, Chris. Resolution 4 is the reelection of Chris Morris. The resolution terms and the proxy votes for resolution 4 are shown on the screen. Are there any questions on this resolution?

No questions, Fiona.

I now put the resolution to a vote. [Voting]

Now I hand over to Chris to chair the rest of the meeting.

Thank you, Fiona. The next one is resolution 5 to reelect the director, Jeremy King, who was most upset because somebody voted against him. But the resolution terms and proxy votes for resolution 5 are shown on the screen. Is there any questions on this resolution?

No questions, Chris.

I now put the resolution to a vote. [Voting]

Now the -- just as a reminder, the results of the meeting will be released to the ASX later today. I instructed Computershare to keep the voting open until the conclusion of Paul's presentation, after which the poll will close. We've now completed the matters contained in the Notice of Annual General Meeting for shareholders, and I declare the meeting closed. Before I just hand over to Paul to do what he always does and waffles on, but everyone loves his talks, and I hope you've got lots of difficult questions for him, but firstly, just to thank all the staff of SPZ that, like most companies, this has been a very difficult time, especially for the people in the U.K. who have been now in lockdown and the people of Melbourne, too. I've been lucky enough to be up here in Queensland most of the time. But they've done a great job. To John, our CIO (sic) [ CTO ], because I'm a little bit involved in technology in my previous life, his team has done a brilliant job in completing our SmartCloud development, which is the core basic development to replace our old system and then actually completed all the conversions of the legacy systems to the SmartCloud platform, which just means we unquestionably sort of have the world's leading product now, and it's great, and also the enforcement system. They've done that also in pretty difficult situations where people couldn't come to work. So well done, IT team. To Richard and the other Board members, [ Macy ], Fiona and Tiffany, and the efforts they've put in, which I got totally confused so many times about trying to resolve the VAT issues, which if we -- if you -- everyone saw, which I'm sure they have, the announcement yesterday, which is a great relief. I think it's been going for about 3 or 4 years now. And just when we're all going to go to court, they decided that they are wrong, which is good. So that's been a great effort. So thanks, Richard and your finance team. Special question to our brilliant CEO, Mr. Paul Gillespie. Paul has really done it tough. I mean he's over there because the Managing Director of the U.K. business resigned and left the business. So Paul had to go over there and was then actually stuck there. So it's been 6 months when he hadn't saw his family at all. But I think he actually understands what the business is all about now because he have to run it. But it's been really, really, really good. And he's done a great job with Richard in that and just restructuring everything. I think like most companies, you're -- we've all learned a lot during COVID, I know in my personal businesses and I think in SPZ, too. And at the end of this, we're coming out with a whole lot better company. So that's it for me. I'll now hand over to Paul.

Thank you, Chris, appreciate the comments. Thank you very much. I guess -- so thank you, everybody, for joining the call. I'm good today. In fact, I'm in good spirits. Obviously, it's a strange way of running this meeting. We obviously haven't done this before. So everybody is learning on the job, if you like. But it's great to see everybody could turn up. As is usual, I've got some slides to run through. So I present this overview, obviously, an update of where -- how we're trading in the first quarter and beyond. We've already released that presentation to the ASX today. And I'll just wait for it to come up on the screen, and I shall talk to it. So if we can get it up, thanks, Ange. I guess before I turn to the detail, I just want to echo some of Chris' comments. Clearly, this financial year, FY '20, has been a year like no other. Whilst we're not out of the woods in terms of the pandemic in other parts of the world, and particularly in the U.K. where we have a large operation, we can definitely see a clear path forward and we are pleased with that. Coronavirus has certainly challenged every facet of our lives and the communities we live in. I'm incredibly proud to be here today to talk about company's resilience and impressive work we've done over the last 12 months. We have delivered growth in difficult circumstances. And importantly, we continue to expand our market opportunities and enhance our future earnings potential. Before we do get to the slides, again, just really to echo some of Chris' comments, I do want to take the opportunity to thank the great team, the people we have at Smart Parking. Without these hard-working, committed and focused people, we would not be where we are today. So thank you very much. All right, if we can go to the first slide, please, Ange. Thank you. All right. So I want to show SPZ at a glance and provide investors with an overview of what we do and also show some key points on our business, in particular how we're recovering from COVID and how we see our growth development. We are an ambitious growth company, and there are some clear targets in this presentation to demonstrate our potential. Also, I want to remind people and give you some idea of the scale in that we capture over 8 million cars per month through our ANPR cams. Our IoT platform, SmartCloud, processed over 31 million transactions daily, which can be as simple as the car arriving or leaving from a parking space or to the payment being made through one of parking payment applications. And also, we're a global company, operating in 10 territories with over 500 customers. We have a robust technology platform, systems that can handle high volumes across multiple countries and sites that were [ our way to scale for ] growth. Also, as I said, we are continuing to deliver growth in the number of sites we manage, in particular through COVID. You'll see on the right-hand side, we've added here that we expect to manage 580 sites by the end of this calendar year. And I'll talk more about this and our FY '23 growth target of 1,000 sites later in the presentation. We go to the next slide, please. So in review of the last financial year, the first 8 months of FY '20 were tracking and trading in line with our expectations. And of course, things changed in March with the implementation of a nationwide lockdown. This triggered an 80% drop in the PBN issuance due to the significantly lower numbers of cars using our carparks. There is no doubt, we were initially hit hard by COVID. As we highlighted before today, we took a proactive approach to the new trading conditions and implemented a number of cost-saving initiatives, and I'm pleased to say we're seeing the benefits of that. Since June and the opening up of the U.K. from the lockdown, we've seen a strong recovery, particularly in our services business. We communicated this to the market in June, again in August at our full year presentation and again the last one in our Q1 update. However, there's clearly been some more lockdowns. And whilst these latest lockdowns in the U.K. are not ideal, we are not seeing the same level of drop-off in terms of the car count [ during this stage ] as we did in end of May, which is, of course, good news. We will continue to update the market as and when the impact of these restrictions become clearer to us and we have all the data to share. Looking now on Slide 4, thank you, how have we traded for the first 4 months of this financial year. Well, we can -- I'm pleased to say that the recovery has continued with positive operating group cash flow (sic) [ group operating cash flow ] of $1.2 million and cash on hand of $10 million at the end of October. We made progress with HMRC regarding our ongoing VAT dispute, as Chris mentioned a moment ago, and also as we -- also as we updated to the market yesterday. As with the impact of coronavirus and lockdowns, we will, of course, update the market of this VAT situation [ and Brexit ] as we get to conclusion. But it's pleasing we got to where we are today. [ I'll come to that ]. Despite the impact of COVID restrictions, the sales team restructure continues to deliver with new site installations of 67 ANPR installs until the end of October. And of course, we're focused on delivering 200 new sites for FY '21. We're also reaffirming our growth target of 1,000 sites under management by June 2023. And I'm pleased to say we continue to build the team to achieve that goal, and we're making progress. We also make progress on expanding our addressable markets, in particular in the services business. We have gained accreditation to operate as an ANPR enforcement provider in New Zealand. We have installed our first 2 sites, and we're busy building a pipeline. I will look forward to updating the market further as this business progresses in the second half of FY '21. If we go to Page 5, please. This is a slide we shared with you before today and tracks the impact of the pandemic on our U.K. business and highlights key dates of when restrictions were implemented and eased. Whilst car count went up again in October, we have seen a drop in November with the implementation of new restrictions and the nationwide lockdown of approximately [ 15% ]. As mentioned a moment ago, we will continue to provide this data to the market, whilst the pandemic continues, to keep everybody informed. We're now on services business on Slide 6. We continue to grow. I will highlight that our relationship with KFC is expanding. We've been busy installing and surveying new sites for installation. And as we called out in our market announcements regarding KFC, there is an opportunity for 250 site locations with this customer, and we're focused on working closely with them to develop excellent products and services. We've expanded -- as I mentioned a moment ago, we have expanded our offering to New Zealand where we are now an accredited operator. We have our first 2 installations. And of course, we want that -- we want to grow that business, building [ our platform for ] growth. But this is an example of our strategy to expand our addressable markets. Okay, Slide #7. So this is new. We haven't shared this data with people before -- with the market before, but it's an important slide, and I believe it gives the market more insights on our multiple growth drivers and increased earnings potential. So if I first explain the chart on the left side of the page, it shows that while we're recovering -- we are in recovery mode, there's been a great deal more potential for improvements. The length of a driver's stay in one of our car parks is attributable to the issuance of a ticket, or PBN. That trigger point of issuance is typically around 90 minutes. You can see here, during COVID, the average stay time has fallen, basically because shops were closed, drivers weren't spending as much time in the car park. And still today, we're behind on that 90-minute mark. Because there are fewer extended stays, there are, of course, fewer infringements, fewer tickets issued. We expect stay times to continue to rise back to pre-pandemic levels of 90 minutes and beyond as and when restrictions are lifted. Obviously, you see this is a year's worth of data from July '19. Clearly, Christmas has an impact as well, the seasonal, because a lot of our sites are [ were opened ] in the Christmas period for a few days. The chart on the right-hand side shows the average number of tickets issued per site per month. Again, we've seen some recovery, but there is still a lot more upside to go. We expect ticket issues at each site to recover fully to pre-COVID levels as restrictions are lifted. The difference is, in July 2019, we had around 390 sites under management issuing pre-COVID levels of tickets. By the end of this calendar year, we expect to have 580 sites under management and the number of tickets per site to continue to increase as and when restrictions are lifted. As I said, our future earnings potential is clearly increasing. Page 8 is an updated slide of site installations, removables and total sites under management. As I highlighted a moment ago, we're focused on that growth target of 1,000 ANPR sites under management by June 2023. This will be a mainstay in our presentation decks to keep shareholders and the market updated as to how we're going with installations for [ rooms and the ] customer relationships. Looking at Slide 9. Like the services business, the technology division has been challenged by the impacts of the pandemic, mainly in the delay of capital projects across all operating territories. However, we've not had any projects canceled, and we have over $3 million of booked orders. We've also been winning business, the latest order here in Melbourne with Queen Victoria Market where we'll be installing a new parking guidance system to fit 513 parking spaces. That project goes ahead in H2 of FY '21. The R&D team were busy delivering our new enforcement products and also supporting the New Zealand team in delivering the services workflow technology and making the business tech-ready for operations to start the enforcement business in earnest. This is a key differentiating factor for us in the services marketplace, particularly in new markets like New Zealand. As I highlighted at the full year presentation, we have made significant cost savings in both the technology and R&D divisions. We set ourselves a task of turning cash flow positive there, and I'm pleased to say the tech division was cash flow positive in Q1. So looking at the final slide, and looking forward to the next 12 months, I'm confident we can continue to deliver growth, notwithstanding the challenging market conditions. I do believe we've come through the worst of this pandemic with a strong, lean business that's fit to take on challenges in the new financial year and beyond. We started FY '21 with momentum and have a strong pipeline of new sites and committed orders. We can grow without adding material fixed costs, and we are well funded with $10 million on our balance sheet. We're expanding our addressable market opportunities and enhancing our future earnings potential. And finally, we are well placed to benefit in structural tailwinds in a new world post coronavirus. So FY '21 should be an exciting and prosperous year for us. And that concludes my presentation. So we are happy to take questions if we open up the virtual portal, Richard, and they'll be, as Chris pointed out, pointed to the Chair.

No questions for you at the moment, Paul.