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Welcome, everybody, and thank you for joining us for the Smart Parking business update. With me today, I have Paul Gillespie, CEO, and Rich Ludbrook, CFO, both of whom are in the U.K. at present. The format of today's event will be Paul will present the slides we released to ASX this morning and then we'd be open to [ King ] to open the line for Q&A. Thanks again for joining us. And on that note, I'll hand over to Paul.
Thanks, Michael. Richard, would you open it on presentation mode? Perfect. Thank you very much. Okay. Good afternoon or good morning to some and good evening to others. Thank you for joining Richard and myself on this call. As you may know, we're both in the U.K. right now, where we're seeing firsthand strong growth in sites under management we've reported in this business update that we released this morning. On this call, we'll take you through the highlights of the presentation pack, and then we'll open the line for questions.
Looking at the slide here on Slide 2, we provide an update on our progress towards our long-term growth target of 1,500 sites under management by June 2025. Along with this, we're also highlighting the other key KPIs of our PBNs issued. The growth rate in sites, PBNs and territories where we operate is something we're pleased with at this stage. If we take these points one at a time, you can see we closed May with 816 sites under management, which is an increase of 32%, and we're forecasting to finish the year at 836. So we're well over halfway towards our 1,500 ANPR site target by June 2025.
You'll see from the next slide that this is predominantly organic growth with some contribution coming from the enterprise acquisition of last year. The NE acquisition that we closed in April this year has a total of 500 sites. However, these are manually operated, so we don't add into the total until we convert them to ANPR operations or technology-led operations. However, I'll cover more on the NE deal later in this deck. The U.K. PBN issuance continues to grow in line with number of sites and the management and is up 71% compared with PCP.
Looking at our APAC operation, we saw good site growth in both factories of Australia and New Zealand. We now have 18 sites operating in New Zealand. We're making great progress and are already profitable in this area. The Australian parking services continues to grow with 24 sites in the management. There is a clear and large timely growth runway here as well as in New Zealand. And as with the U.K., as you see the growth in sites under management, you also see the growth in PBNs with H2 APAC PBNs up 83% on H1 of this year.
And finally, in our most recent territory of Germany, we've already signed contracts and commenced site installations, with a team in place to take advantage of a significant growth opportunity in Europe's largest population. And again, I'll cover more on this opportunity about Germany shortly in the deck.
If we turn now to Slide 3, please, and let's look at the waterfall chart and the makeup of the estate growth in more detail. As I mentioned a moment ago, we started the financial year with 619 sites. In the previous 6 months to June 30 last year, we added 43 net new sites. In FY '22, we've added 197 net new sites by the end of May. We had 118 net new sites in the first half and 79 net new additions in the first 5 months of the second half. That's clearly an acceleration in growth.
Organic growth contributed 129 net site additions with the Enterprise acquisition adding a further 68. We've not included the NE sites in the totals as they have manual operations today. The growth has also come from our APAC region, where we've added 42 new sites this year. This is pleasing for us as it shows our tried and tested strategy is working in new territories, and we continue to win market share.
I'll also call out these numbers. These numbers show a much reduced attrition rate in the second half. In the first half, you'll see we had 58 removals and in 2H, so far, we've had 20. Our shareholders will remember the key reason for the high level of renewals in H1 was due to a contract loss that included 38 sites. We continue to work hard on our account management to ensure we retain customers for the long term and also see a low churn rate.
On this slide, we've also provided some guidance on where we expect the estate to close at the end of June. For me, this is a sign of our ongoing progress and confidence in our execution. At the end of the financial year, we expect to have 836 sites under management, which is a 35% growth on the same time last year.
And finally, we confidently reaffirm our June 2025 group-wide target of 1,500 sites under management. And as I said at the top of this presentation, it's good to see we're well over halfway.
If you can turn to Page 4 now, please. If we look at the key revenue driver for SPZ, the number of parking breach notes issued on PBNs, or PBNs, as we call them, again, we're enjoying strong growth in this area. PBNs for the year are up 71%. With 2 months trading completed, we expect Q4 issuance to be over 130,000 PBNs.
Remember, the seasonality when you're reading these quarterly bar charts for the last 2 years. Q4 this year will be up 25% over the PCP and is 5x the COVID-depressed levels of Q4 and FY '20. We're now averaging 125,000 PBNs per quarter and expect this to continue to rise as the number of sites under management grows. Of course, the model for us is simple. Growth in sites shows growth in PBNs and, of course, revenue.
Page 5 shows a similar breakdown in APAC PBNs. Now I don't plan to spend too much time talking through the slide. I partly say that we're pleased with the progress in the region and happy that PBNs are growing ahead of our expectations at this time, and I look forward to reporting in more detail in August.
Now on Page 6. Of course, this is something I'm keen to update shareholders on in terms of the proposed parking code of practice. Now this topic has been a moving feast from day 1, it's fair to say, and it started 4 years ago, and it's gone through various twists and turns. You'll see here that I've tried to lay a time line of events to make shareholders aware of the length of time involved in this legislation. However, you'll see that as recently as the 7th of June, the government has decided to withdraw the code of practice for further review. At the very least, the enactment of the code into legislation has been delayed.
Now I know many people will say this is a good thing for us. And of course, in the sense that the reducing pricing model they put forward in isolation would have impacted our financial results. So from that perspective, the fact that it's been delayed and pricing removed is a good thing for us. However, there's another side to this coin. And from day 1, we've always advocated for a modified code to be enacted. Leaving pricing apart, the code had some positive initiatives such as the oversight committee and single appeals process. We've always said the higher regulatory standards will competitively suit us and make things more challenging for smaller players in the market. It will also drive new consolidation opportunities, which we're well placed to take advantage of.
That said, the code has been withdrawn. Industry discussions with government will continue, a new modified code is likely to be tabled at some point and hopefully contains the best parts of the old one and removes the proposed pricing structure they had in the past. Of course, as this unfolds further, I will keep the market updated and shareholders updated.
If we look now at the next slide in Germany. Shareholders remember that we officially opened the German operation in January of this year. Since then, we've hired an in-country managing director, a sales team, operational expertise, developed key supply chain and started to win customers. The investment to date in the second half is at $500,000 and we'll continue to invest in order to capture the huge opportunity that Germany presents us. As you see on this slide, we've signed 4 new contracts already and commenced installations. The German operation is moving at pace and we're excited to update shareholders on our progress in our latest operations territory. As I mentioned earlier, I look forward to reporting in more detail on this operation at the full year results.
On Page 8, we've provided an update on the NE parking acquisition that we closed in April. We've been very busy working hard integrating this business into our U.K. operations. In particular, we've been talking to customers in order to provide an upgrade path to ANPR or a technology-led solution. I'm pleased to say that this has been well received and we have 5 sites being converted this month.
Shareholders will remember that NE had over 500 sites under management when we closed the deal. Our objective is to selectively convert clients to ANPR as this will provide a significant upgrade in revenue potential from the existing NE in state. If we look at the table on the slide, you'll see that the current NE site performance compared to an ANPR driven location is well behind what we would normally expect. That's the opportunity we see and the reason we acquired the business. We will continue to drive the sales team forward in our plan to convert these sites and provide our new customers with a great technology solution that's fit for purpose.
If we look to the final slide now on our execution priorities for the financial year and also for this financial year, but also taking us forward to FY '23. I will leave you to read through the points on the screen, but I'd like to highlight 3 key points that we're focused on. Number one, we'll continue to execute our organic growth strategy across all operating territories, delivering a high level of sales activity to win, install and maintain ANPR and technology-led parking solutions to parking locations. This is a tried and tested model with a large runway for growth across all of our current markets.
The second point is we'll continue to look to expand our operating territories through both organic and also through inorganic opportunities, some we are proactively taking bunch of today. And three, we'll be working closely with industry bodies and the U.K. government to implement new code of practice at some time in the future.
Thank you very much for listening. And if you have any questions, we'd like to open the lines now to some Q&A. Thank you.
Thank you, Paul. If you'd like to ask a question, please either use the chat function or take yourself off mute and ask verbally. While the queue forms, I might start the Q&A session with an opening question.
Paul, could you describe the competitive landscape in Germany?
Of course. So it's a very different market here in the U.K., of course, in particular, that the ANPR is not widely used. So I think people may remember that legislation changed maybe 12 to 24 months ago in Germany that allowed the use of ANPR technology to record number plates and also access, keep the details, so you can send the PBNs in the post like we do here and also let me do in Australia and now New Zealand.
So whilst there's a number of traditional parking operators, people who would provide -- like in any parking, for example, they provide a warden on site to go and issue parking breach notices by hand. So that was one of the -- that is the kind of overriding use of operator or use of management today is through manual operations. But in terms of ANPR operators, it's less than 10, whereas in the U.K., it's close to 100. So not a crowded market. I see twice the size as well in terms of sites under management, research would tell us. So it's one of the key reasons we are making the investment and really going for it in that territory at the moment.
Thank you. We've got a question on chat from [ Tina Wilson ], Paul, for you. Re NE parking and the site upgrades to ANPR. Word please for the upgrades.
So the model we operate in the U.K. today, and we continue to operate and will operate with any parking is we'd obviously approach the customer, have a good conversation with them about the type of service we can offer and provide a survey to them to say, look, we believe that a number plate recognition solution will be fit for their site. If the customer agrees and we sign a contract, we then pay for the cameras to be installed, new signage, as well as any payment methods, if it's a chargeable car park. So we cover that CapEx and the commercial arrangement for the customer would normally be, if it's a paid solution, we have to pay into a machine or via a mobile phone app. The customer would keep that revenue, and then obviously we take the parking and breach notice revenue. So that's the way it tends to work.
On average, across our U.K. estate today, and it's a little bit quicker in APAC at the moment. But on average, you would see a payback of somewhere between 6 to 8 months on that initial GBP 8,000 to GBP 10,000 CapEx investment.
Thank you, Paul. We've got plenty of time for Q&A. Nick would like to ask a question.
Paul, it's [ Nick Kelly ]. Just, I know we've had a brief chat, but you just might want to talk about petrol prices and parking volumes.
Yes, absolutely. It's -- well, petrol price has gone up. That's the first thing I'll say. And it's incredibly expensive at the moment for your car. I'm sure everyone is doing in the same way. But we have, certainly, over the last couple of weeks, seen a slightly lighter car volume through the estate. Of course, Thursdays, Fridays and the weekends are always very busy. But certainly, earlier in the week, we're seeing a trend where it's slightly lower car usage. I suspect that's going to spike this week, though, Nick, given there's a few rail strikes going on in the U.K. So I suspect you'll see a higher car usage. But it certainly had -- we are certainly seeing a slight drop in cars through the estate in the earlier part of the week. Weekend seems to be holding up, seems to be very busy. And of course, this time of year is busier anyway with weather improving, the holiday times happening, all of our seasonal sites have really excited to pick up.
So we haven't seen much drop in those, but certainly, just like the Mondays, Tuesdays, Wednesdays, when it's a bit lighter. And I suspect that's driven by cost of living and in particular, petrol.
And just a follow-up unrelated question. I mean the final auction of the data side of the road seems to be getting close. Are you hearing anything from, say, Wilsons about whether that will open -- that will be the catalyst for the big market to open?
Not from Wilsons. No. I mean, it's something that we're monitoring closely, as you know, because it will be the ability to access, keep the details in Victoria, it will be fantastic for us and would allow us to open our Aussie operation further rather than just Queensland as it is today. So yes, that's something that we are clearly focused on Nick, and clearly following very closely. If it's another territory we can open and operate in the same way we do, as we do in the U.K. and APAC and now in Germany, then we'll be very keen to do that.
Hi, Paul. This is Nick, can you hear me?
Yes. Hi, Nick.
Thanks for including that slide that sort of showed the unit economics of adding an incremental new site. It would seem to suggest that for every incremental site you add, $2 out of every $3 of revenue would flow to the bottom line. Am I reading that right, or is that overreading it a bit?
Perhaps, Richard, you might want to answer or help Nick out?
Yes. So Nick, basically, the way it works is, a typical site will issue anywhere between 60 and 80 PBNs per site. So for the purpose of this, we've used 60. Obviously, there's direct cost to print and post the ticket and inquire of the DVLA for the business name and address. On incremental sites, obviously, there's a marginal increase in overhead. So effectively, each site generates just over $2,000 of EBITDA. And as Paul said, typically, we get between sort of a 6-month and a 9-month payback. And so that's why we're so focused on converting some of the 500 sites to technology. Now obviously, we will never be able to convert all of them, but we are targeting obviously converting several of them.
Does that EBITDA include an element of central costs, so like a fully allocated EBITDA?
That includes incremental overheads for bringing on new sites.
Yes. Great. And just with the seasonality slide. Would it be fair to say -- it has been a couple of years, I guess, where it's been a bit disrupted. Would it be fair to say that FY '22 seasonality is more representative of what we should expect going forward?
Yes. I was about to say, yes, I mean, Q3 is always the quietest quarter. And again, this is U.K. we're looking on this particular slide. And interestingly, we were looking at the New Zealand business a few weeks ago. We were just looking at, again, the kind of seasonality that we've seen in PBNs being issued in that part of the world. And I really expect to see sort of the reverse with January and February being really busy because it's holiday time and that sort of thing.
So obviously, in this part of the world, we see a big spike in Q4 and Q1. But you see it is quite interesting because I guess everybody -- most of our sites are in metropolitan areas, in particular, Auckland today. And in some holidays, everybody leaves Auckland. So we didn't see the spike we were expecting, but of course, it's now back to it used to be busy during start of the holiday period. So that's a learning for us, which is good. But no, what you're looking at here in the FY '22 bar chart is certainly representative of the seasonality you're going to see change. But of course, as you bring on more sites, we'll see the PBN issuance growth. So this is representative.
And maybe just to push one through, just one more question. So back on the last slide where you talked about redistributing technology assets towards the parking business. Could you just give us a bit more color about that?
Yes, sure. I mean we are clearly growing quickly in our services business, our core business, okay? And what's allowing us to do that is the fact that we do have our own technology. A lot of our competitors utilize third parties for processing means or [indiscernible] sorts of things. Whereas -- whilst we buy cameras off the shelf, we obviously don't manufacture cameras, the recognition software, the matching software, all those kind of things is what we do. It's we own that. We own that IP. And so that allows us to roll out or accelerate our growth into new territories quicker. So we couldn't have opened Germany as quickly as we did, or APAC as quickly as we have, without owning our own technology. So we want to make sure that that's the best in class. We want to make sure that we've got the best processing systems, most efficient processing systems. So reallocation of some of that resource that we are predominantly just focused, on our technology business of sensing, IoT, that sort of thing, to the services business where we can see a quicker return really.
So that's the key focus is we want to accelerate the growth of our core business. That's group where we're growing fast. And so to say, we're totally walking away from IoT, because we're not, because that's really what's got us to where we are today in terms of our services as well. So they're very complementary, but we are going to focus the team more on services -- or we'll be focusing more on services.
Do we have any more questions?
Luke from [indiscernible]. I know there's no financial numbers in the update. But just for my model, I wonder if you can shed some light. Was there any change to the average revenue per PBNs than you'd usually get around that sort of GBP 60?
It's very similar, Luke. I mean, I guess the key thing in terms of the second half of the year is obviously Q3. You've got some seasonality or negative seasonality. You've also got a heavy investment in Germany, which Paul talked about. But the rest of the estate has performed very similar to the first half of the year.
Yes, cool. That's all right. Just -- you gave the PBN numbers, so I'll make that assumption in the revenue. Just further to Nick's question there on the unit economics, which I agree, it's very helpful to break that out. So what sort of fixed overheads would sit behind that unit economics? What sort of dollar value? And maybe I'm thinking more from that FY '25 sort of target that you guys have set? What the overheads look like behind the unit economics?
So like I said earlier, so this is presented for incremental sites, right? So the incremental overheads are we have a processing team in this building. So obviously, as you add PCNs, you're going to get more appeals, more cancellations, more payments to handle. So over time, there will be a small increment in staff as we're handling a higher number of PBNs.
Do we have any more questions? So we got quite a few on the call. I'll just give maybe another 30 seconds if anyone wants to ask. No?
Okay. Rich, do you want to just take us through the final slide again?
So I guess, unless there's any further questions, I'll finish just by leaving people with our priorities of what they have been this year and what they're going to be going forward into FY '23. I mean the key things for us are clearly, as I mentioned a moment ago, continue to execute our organic growth strategy across all of our territories and delivering that high level of sales activity to win, install, and maintain ANPR and technology-led management solutions. Clearly, it's tried and tested. As I've talked a lot about, the U.K., the challenge we own as well facilitates our growth, facilitates our ability to expand quickly as well. So those are the key things for us.
Added to that, operating in new territories, finding new territories, either via organic means or through inorganic opportunities. That's something we're very focused on. But of course, and finally, the regulatory environments we're working closely with industry bodies and the U.K. government to implement the new code as and when, but of course, we're very pleased with the situation where we are today where the current code has been removed. So that's good news for us.
So those are the key priorities, these are key things we're working on here at SPZ. And any other questions you may have, please reach out. And if not, I will look forward to updating shareholders when we come to the market in August. So unless there's any other questions, I think we'll leave it there.
Paul, it's Joe from [indiscernible]. Just on the U.K. parking curve, what do you imagine to be the going forward? Is there more consultation with industry and then the formulae, sort of a final version, and then go through Parliament again about how you envision?
That's I think so, Joe. It's the only thing I can say confidently. The fact they've withdrawn it means that a new code needs to be presented back to Parliament, okay? So I suspect they'll go back through a consultation process and another consultation process. One thing they didn't do last time was perform an impact assessment on the market, which is something that we highlighted to the government, which is really what brought this about to change things, and they've talked about doing that. Whether or not they'll do it, we don't know. Just a window into my rock-and-roll world, I was at Parkex last week in the U.K., which is a parking exhibition, which happens every year. And clearly, there was lots of talk about parking code at the expo. There was 1 or 2 seminars about it, which I attended, and a lot of feedback from industry bodies as well as other competitors is, it may not go ahead at all, all right?
Now we can't say that for certain. I suspect there will be something, but I reckon it's going to be watered down from what's already there. The fact they've walked away from the pricing again is quite interesting to me. It just says that maybe this government aren't prepared to deal with it. Maybe there's too many other things happening in the macro situation; cost of living, war in Ukraine, all those sort of things that they really want to be doing this well, I don't know. But yes, if we just look at the brass tacks, just look at the facts, they've withdrawn the code, they have to represent it if they want to put something through, which means they've got to go back through the whole process again. So Either way, it's adding probably another 12 months to where it was going to be.
Yes, [indiscernible]. And then just on the land type in Germany. It sounds like you guys are scanning for acquisitions there. Do you think there will be also similar files to the NE and the EPS sort of parcels?
I mean, look, as I mentioned, we're open to looking at these inorganic opportunities, because we want to grow. And Germany is a fantastic market, right? And already the fact we've been there only 6 months, right? We have been looking for a bit longer than that, obviously, and getting prepared to hire people and so on and so forth. But it's almost like a greenfield solution, and there's lots of -- I say lots, there's a number of sort of any parking type operations in Germany that are right for that kind of technology overhaul, if you like.
So to answer your question, yes, we're keen to look at those sorts of things. But we're also mindful of the fact that we've just opened. We've got a new team. We're actually winning business organically, we're already making things happen. And how quickly can we do that versus an acceleration of inorganic acquisition, if you like. But we're keen to look at it. And of course, we'll evaluate things correctly. And if it's going to work for us and work for the business, then clearly, we'll look at it closer. So I guess that's a long wind of saying, yes, we're looking at them, but we'll evaluate things as we should with all these opportunities.
Okay. And just one last one. Are you seeing any capacity constraints across the business, whether that's installation, people in the field or equipment to...
That's a good question. Clearly, we've seen, certainly, in our technology business, some supply chain challenges in the second half, in particular, so getting hold of certain components has been quite challenging. In Germany, it's quite interesting, gaining capacity of people. That's been an interesting challenge, but we seem to be getting over that.
In this country, in the U.K., as same in Australia today, recruitment is a challenge, it's always a challenge trying to find good people, but just filling regular roles and the processing roles we have here at the moment. Our installation team, we've got 1 or 2 open vacancies right now. It's been quite challenging to build them. I mean I think that's a common problem across the world at the moment, right, just because the movement of people is not what it was. And so therefore, it will get easier. But that is -- I won't call it a capacity issue, it's just challenging to keep things moving at the pace we want to, but we seem to be making that happen.
Okay. Do we have any more questions? I think that's probably a no. I guess, so if everyone's happy, I'll wrap. But look, thank you very much for joining. It's great to see so many people join today. I think that almost a record at one point is that maybe 50 people on the line, which is great. So thank you for taking the time. And as I said earlier on, please don't hesitate to reach out if you need any more information from us. And if not, we look forward to updating you in August.
Thanks, Paul.
Thanks very much. Cheers, mate. Bye.