Good afternoon, everybody, and welcome to the Smart Parking Limited FY 'twenty one Results Conference Call. Thank you for joining us. Today, we have Paul Gillespie, CEO and Richard Ludbrook, CFO with us. The format of the call will be that Paul and Richard will take you through the presentation pack that we'll share on the screen, which we've also released to ASX, and then we'll be pleased to open up the line for questions. Thank you again for joining us.
And on that, I'll hand over to Paul.
Excellent. Thank you, Michael. So good afternoon and thank you for joining me for Smart Parking's FY 'twenty one full year results briefing. I'm here in the UK and I'm joined by our Group CFO, Richard Ludbrook, who's currently in lockdown in Auckland, like many people on the call today, I'm sure. But today, we'll take you through the pack we've released at ASX, then we'll open the lines for some questions.
Before I start, I'd like to highlight some key points, starting on Slide 3, please. Whilst so many of you in Australia are in lockdown, markets in the UK have been opening up for some weeks as COVID restrictions continue to be eased and vaccination rates rise. I've been back in the UK since late June and I can see the growth in activity and confidence on a daily basis. This is evident from our performance as we've rebounded well and have delivered a strong Q4. We made $2,200,000 of adjusted EBITDA for the year.
Of this, dollars 1,570,000 was in Q4. While the 3 54% growth is flattered by COVID impacted PCP, despite this, Q4 EBITDA performance was up $1,300,000 on Q4 FY 'nineteen in a pre COVID world. Also, PBN issuance was up 2 78% in Q4. So for us, the recovery is well underway. The second point I'd like to make, the deliberate decisions we took during the pandemic to ensure we came out of this as a stronger, more efficient company are now paying off.
We took advantage of our market leading technology, specialist expertise and strong balance sheet to drive accelerated growth and greater returns. You can see this right across SPZ. We've increased our number of sites under management to 6 19 in the year, that's up 25% and we are regularly winning new customers in both operating divisions. We've used the time to clear up legacy issues like the VAT disputes, where we got a $2,900,000 cash refund from HMRC. We've made a terrific acquisition in Enterprise Parking, which we announced in August, and we bought back $1,100,000 of shares at an average price of $0.17 to enhance earnings.
And we remain well capitalized with $9,700,000 of cash on hand today to fund our growth strategy. Put simply, we stayed focused, we've kept our heads down and got the job done, and I'm proud of the way the Smart Parking team overcame adversity and delivered great outcomes for our clients. Added to this and taking further advantage of the opportunities the pandemic presented, we are significantly expanding our adjustable market opportunities. I'll talk more about our expansions in New Zealand and some states of Australia later, but I'll say upfront that these markets are attractive and a great fit for SPZ. In short, we can leverage our infrastructure in Melbourne and build on our existing sales presence on the ground in New Zealand.
We are and will continue to disrupt legacy industry structures that provide site owners with inefficient and inadequate answers. We have some new disclosures in the pack that focus on this new growth strategy that I will discuss later in some detail. And the final point I'd like to make, our target of 1,000 sites under management by 2023 is firmly on track. It probably seemed to many that to be an aspirational wish at best when we first published it, but as we speak today, we already have 7 20 sites under management. We've added 101 sites since June 30, 2 thirds roughly of these came from the Enterprise acquisition and the remainder are organic.
We can organically add 180 net new sites in FY22 and FY2023. And I'm pleased to report we've started FY22 strongly and reaffirm our 1,000 site goal. I'll now hand over to Richard to take you through some of the financials into more detail. Richard?
Thanks, Paul. I'll start with Slide 6, where you will see the group adjusted EBITDA profit, excluding one off items of $2,200,000 was up from an EBITDA loss of $900,000 in FY 'twenty. Despite months of government restrictions, total revenue of $20,700,000 for FY 'twenty one was down only 4% on FY 'twenty. The business experienced a strong recovery in Q4 as COVID-nineteen restrictions eased. Revenue of $7,200,000 in Q4 was the highest quarter in 3 years.
This, along with cost saving initiatives, led to Q4 EBITDA of $1,600,000 This compared to a $1,300,000 EBITDA loss in Q4 FY 'twenty, which was heavily impacted by COVID-nineteen. Overheads were down 20%, and more detail on the cost reductions is included on Slide 10. The company settled its long running VAT dispute with HMRC, resulting in a one off net benefit of $6,400,000 in FY 'twenty one. Slide 7 shows the group had free cash flow of $1,100,000 up from negative $300,000 in FY 'twenty. The group incurred $2,000,000 of capital investment related primarily to the deployment of camera technology in the U.
K, which will contribute to future earnings growth. With the expected rollout in the U. K. And new markets covered later in the presentation, CapEx is expected to increase to near $3,000,000 in FY 'twenty two. Included in the other recurring items is the $2,900,000 VAT refund from HMRC.
The company drew down a U. K. Coronavirus business interruption loan for $2,700,000 in September 2020. And subsequent to balance that, the company acquired Enterprise Parking Solutions for $1,500,000 out of cash reserves, which Paul will speak to in due course. Moving to Slide 8.
Revenue in the parking management division decreased 6% to $16,300,000 COVID-nineteen continued to cause volatility in results. However, despite some COVID-nineteen restrictions, the division had a strong finish to the year with parking breach notices in Q4 up 278% against Q4 FY 2020 and up 14% against Q4 FY 2019. Sites under management increased by 25% during the year and this along with the recovery is expected to drive revenue and earnings growth in FY 2022. EBITDA of $4,200,000 was up 36 percent compared to FY 2020 with operating leverage driving margin expansion. The EBITDA margin increased 800 basis points to 26%.
We remain optimistic about the outlook for this division given the lack of U. K. Restrictions and high vaccination rates. We've also expanded into new markets in New Zealand and Australia, which Paul will speak to later in the deck. Slide 9 shows technology revenue of $6,900,000 was up 3%, and installations included the City of Maran, Wyndham City Council, Queen Victoria Market and Ormiston Town Centre in New Zealand.
The adjusted EBITDA profit of $300,000 improved from a loss of $1,800,000 in FY 'twenty, a pleasing result in spite of ongoing disruption from government lockdowns. The company has firm orders for new installations of $3,300,000 This includes Gatwick Airport, although the timing of recognition for this is uncertain given the evolving situation. The company continues to invest significant resources in R and D. Costs in this division were steady at $1,000,000 and it's worth noting that most R and D costs are treated as an expense through the P and L. Slide 10 shows the breakdown of the 20% reduction in costs.
Staff costs, comprising 72% of total overheads, were down following a 24% reduction in the group's headcount in the last 12 months. The services headcount reduced by 23%, and the technology and R and D headcount was down 33% combined. Other costs, including travel and motor vehicle costs, were down as a result of lower activity and due to the restrictions in place. FY 'twenty two will see an increase in overheads as activity levels increase, but revenue will grow faster than the growth in overheads. Slide 11 shows the group maintains a strong balance sheet and is well placed to fund growth strategies.
The group had $10,700,000 in cash, and this includes the $2,900,000 from HMRC as part of the VAT settlement. The coronavirus business interruption loan for $2,700,000 was drawn down in September 2020. The term of the loan is 4 years and was interest free for the 1st year. Principal and interest repayments commenced in September. And finally, the company commenced a share buyback during the year, acquiring 6,100,000 shares at an average price of $0.173 I'll now hand back to Paul to discuss the recent acquisition.
Thank you, Richard. Okay. So as on Slide 12, so as I mentioned at the start, we deliberately decided to take advantage of the opportunities that the pandemic presented to accelerate our growth and enhance earnings for shareholders. As highlighted at the half year report, we said we'd spend up to $5,000,000 to buy back shares or invest in other growth initiatives. Alongside the buyback, we also looked at a number of complementary and accretive acquisitions.
We spent $1,500,000 of our growth capital on Enterprise Parking Solutions. It's a high quality business and a great accelerant for us. We paid circa 1 to 1.3 times EBITDA for a growing, profitable, cash flow positive business that offers additional cost synergies. It's immediately earnings accretive. The business had revenues of $540,000 excuse me, for the 3 months ending July 2021.
It's been growing nicely and the management have done a good job and they're also helping us with the transition. Sites under management has grown from 5 to 68 in 3 years, and these sites perform well with many at or above the SPZ average performance benchmarks. Integration of the Enterprise Estate is well underway, and we will continue to evaluate other acquisition opportunities to complement our organic growth. We are selective and disciplined, but we are delighted with this first acquisition. Moving forward, Slides 14, 15 and 16 are updates to the pandemic tracker, site installations and key metrics that we track daily in the business and update the market with regularly.
However, I'd like to focus on Slide 17 for now, please. Along with the sustained growth in the UK, I see these slides as the next growth chapter for Smart Parking and the international expansion of our Services division. In New Zealand, we've started to build an estate of sites under management and operate in a similar fashion to here in the UK. We've quietly signed and installed 10 sites since we started in February and we wanted to show the market some results before we made a song and dance about what we're going to do. Our team on the ground are making great progress in a market full of opportunity.
New Zealand reminds me of the UK marketplace pre-twenty 12 before regulators outlawed the use of clamping and towing on private land. Current service providers offer site owners with inefficient and inadequate solutions. Tow trucks, little to no remote technology leading to multiple lost revenue opportunities. Like the UK, we've gained accreditation that allows us to access keeper details, which then means we can install ANPR camera technology and digitally record car entry, exit, efficiently process the data and work out quickly how many cars contravene the car park conditions of use, the same as the UK process. As with U.
K, we provide a compelling CapEx free value proposition for land owners. This 0 CapEx solution is appealing to Kiwi customers and they are delighted with the performance offered by our solutions that are solving the parking abuse problems they have. Whilst it's early days and we have a small sample of sites, we are seeing a 3 month payback on the CapEx invested to date, which is proving the model and pushing us forward to win more business. We have a clear go to market plan to build scale. We're starting in Auckland and have already established a presence in Wellington.
As you can see on this map, there are multiple other metropolitan centers we can target and will do so as we grow. At this moment in time, we don't precisely know the total addressable market due to lack of available research, but I can say there are hundreds of potential sites that we could manage over time. I'm excited about this growth opportunity and I look forward to reporting on further progress in the future. Turning to Page 18. Australia is another new market we can expand our services offering into.
It's another example of us using the time during the pandemic productively. The strategy is simple. We can leverage our base in Melbourne with our technology and expertise and provide site owners far more value. It's a legacy industry with inefficient solutions. We can provide consistent, best of breed compliance and regulatory standards.
At this point, we have access to keeper details in Queensland only. However, the regulatory environment in WA, South Australia and the Northern Territory will also allow us to operate there in the future. The first sites are underway in Brisbane and Gold Coast, and I'm pleased to report they're performing well. As with New Zealand, it's early days, but there's lots of room for profitable growth. Looking now to Technology on Slide 19.
As with the Services business, we've used our time during the pandemic to deliver new products, win business and carefully manage our costs. In particular, we focus on existing customer contracts, ensuring we gain the extensions we require and we have also expanded the contracts by selling new solutions that will enhance the customers' experience and drive higher margins for SPZ. Key contract extensions in Wellington, Moonee Valley and Hamilton have been a great success and secures the customers for years to come. Added to this, we've bridged the gap between our Technology and Services business by pitching and supplying existing technology customers with ANPR solutions that will allow them to manage their off street cancelled parking more efficiently. I expect to update shareholders further on this project later in the year.
Slide 20. As mentioned a moment ago, we're always looking to leverage our technology and R and D capability across the Group, not just in our Technology business. This is evident here where we're working with an existing services customer, in this case KFC, to leverage our AMPR and SINCE technology to facilitate a seamless customer ordering and pickup system or click and collect. We're working closely with KFC and we'll be deploying the 1st site for evaluation in 1H FY21. Following a successful evaluation period, there will then be a project to roll the system out.
This is an exciting development project that I believe has the ability to be transformational for our Technology business. I'll now turn to Page 21 and make some concluding remarks. As we're demonstrating, Smart Parking is a growth company in growth mode. You can see that from growth in Q4 of FY 2021. The new financial year has started strongly.
Our markets are recovering and our competitive position has improved. The value of our offer is compelling both in the UK and our new APAC markets. We're actively adding new sites, building the pipeline and signing new clients. We're leveraging our technology, expertise and balance sheet to accelerate growth and enhance returns for shareholders. We expect FY 'twenty two to be a solid year of growth.
We will add 180 net new sites this year and a further 180 net new sites in FY23 and we're on track to deliver the 1,000 sites by June 2023. While recovery in the UK is undoubtedly a tailwind, it is a disciplined execution of our growth strategy that will deliver long term growth and returns for shareholders. That concludes the presentation and the slides. So thank you very much for listening. If you have questions now, we can open up the lines for some Q and A.
Richard?
Hello. Can you hear me okay?
Yes. Go ahead.
Hello. I've unmuted myself. Can you hear me?
We can hear you. Yes. Go ahead, John.
No. Sorry, not working.
Any other questions, Megan?
Paul, I might start off the Q and A. A question for Richard. Richard, could you talk us through the payback periods on the CapEx in New Zealand and Australian markets, please?
Sure thing, Michael. So we're currently issuing 300 breaches per site in New Zealand and Australia, and that compares with AT in the UK. So there's a significantly better yield on the New Zealand sites. Now look, it is early days and behavior may change, but certainly, they've been fantastic so far. 300 tickets will generate approximately $10,000 worth of revenue per month at a 70% 77% EBITDA margin.
So you earn approximately $8,000 on each new site that we install, and we're getting a payback of just under 3 months.
Any other questions we may have? I agree. He's done such a great job, so I'm happy. Well done to him in the book. John, I believe you are trying to ask a question.
I mean, you could use the chat function on the Zoom, if you like. And ask it you could type your question, if you like. Okay. Okay. Well, if there are no other questions, I guess we could sit here and look at the screen for a bit longer, if you like, but keen to answer some questions if anyone has them.
Paul, just one thing you said, but I don't know if everyone understands what you mean by that, who makes access to that. The Keeper details? Yes. Okay. All right.
So I guess the interesting thing, well, if I start it again, so the UK is a relatively unique operating environment whereby we can obviously install number of car recognition cameras on street car parks in private land. And if people or if cars overstay or contravene the parking conditions, we can then access the DVLA database, the driver, vehicle and license agency database, pay £2.50 to get the keeper details and then send them a parking breach notice in the post. Finding other regulatory markets that are that the way you can access those details is quite challenging. And we've been look for some time and we've applied in the past in New Zealand and obviously not been successful. And when we applied again late last year, we were successful.
There's been a few changes to the regulatory environment, which means that we can operate in the same way in New Zealand as we do in the UK and access those keeper details remotely. Let me say, just one way through a keeper, the owner of the car. Yes, the keeper is the owner of the car or the registered keeper. Yes, Australia. Same, UK, Australia.
But it's I mean, the interesting thing there, Chris, as you sort of highlight, obviously, in Queensland, a slightly different environment. And the way we access those details is different to what we do in the UK and New Zealand, but the fact is we're able to get them and we're able to operate in the same fashion in Queensland today. So that is that's a big step forward for us and we're actively looking for other environments or other territories where we can operate in the same fashion, because it's a great business and we understand it very well and it's a profitable company and a profitable market. Try to put this
question in, Paul.
Here we go. How were we able to buy enterprise so cheaply? How be able to buy well, basically, it was I met with the company founder and CEO several times. We discussed his sites and he put forward a number we felt was great value. So we accepted it.
We went for it. That's really what it came down to. The founder wants to do other things with his life. He's a bit about him. He's quite a young chap, hasn't been at it very long.
Its background isn't in sort of technology or parking, his background was in banking actually, used to work for UBS, but got involved quite by chance through a colleague of his working in private equity, who suggested parking management to be lucrative and he's done well from it. And he's going off to do other things with his life and wants to liquidate his realize the value from his efforts. So I think on one hand, it may seem cheap to us and we believe it was a great value deal for us and we can I think there's a lot of organic growth to come from the sites that you already have, the customers that we've obviously acquired? It's obviously on us to make sure that we deliver a good service to those customers and they're happy with Smart Parking and the work we've done in the last 2 weeks has been we've been pretty busy meeting these customers. I met some myself last week and they're all very excited by the transition.
They're happy with the service they're getting and they're happy with what we're proposing. So I see us growing that estate. So no, we're very pleased with it and I think all parties were happy with the outcome. I think there might be another question. Greg Hoffman, you got your hand up?
Could you comment Greg has asked some questions. Could you comment on the corporate landscape in terms of SZF being an acquirer or potential acquiree as per previous approach? Well, obviously, in terms of being an acquirer, we've shown our hand and we've looked at a number of these smaller acquisitions like Enterprise. And I think we said some time ago, the UK parking market is quite fragmented and there are a good number of companies of a similar size, some larger, some smaller to Enterprise that represent potential growth vehicles for us. So we'll continue to look at those.
But as I said during the presentation, we are selective. We're not just going to go out and buy the first thing we see. We want things to be the right fit. Enterprise was absolutely the right fit for us. We could work well with the founder.
It was a business that was clean, tidy. Diligence was straightforward and easy, all those kind of things all lined up and tick the boxes. We don't want to be looking at things that have too many challenges. So for us, yes, we'll continue to look at those. Would we be acquired?
I mean, look, we had an approach some years ago, which was interesting at the time. But of course, there's we're in a different world today, aren't we, in terms of COVID and there's other things. There's a new parking bill that's going through Parliament at the moment, which has the potential to change things, change the operating environment somewhat, which we're monitoring closely and we see it as a positive in a lot of ways, because it brings in more regulation for these smaller companies who can't operate in that way. So I see more opportunity for us going forward with the parking lot as well. So yes, I mean, for us, yes, we want to build this company, make it successful.
Of course, if you do a good job, then you might attract attention, so who knows in the future. But there's nothing on the cards right now. I've got another one here. What is your appetite for and that's from Laurence, what is your appetite for more similar deals? As I mentioned a moment ago, the appetite is there for the right one.
It's very easy to get carried away and look at everything and think we're just going to run the world. But for me, let's look at the right deals at the right time and make sure that they fit our strategy. So like I said, it's enterprise ticked all those boxes. It was a great company, going in the right direction, good people behind it and clean and easy to execute. Do you have any other questions?
Do you know John's asking a question, John Stanningford. Do you have an earnings forecast? We don't give guidance on these calls, but so now we won't be forecasting the earnings and pressure on.
I mean, you can certainly see how Q4 performed. And I guess, subject there to there being no further restrictions, clearly, you'd expect a very strong performance in FY 'twenty two.
Exit run rate coming out of going into FY 'twenty two is strong, and we're pleased with where we're at. Of course, we're busy integrating enterprise certainly here in the UK. That's a good sized project for the team right now and is going well. I'm pleased to see the pipeline is looking strong. I'm pleased to see the energy is there with the team.
Clearly, New Zealand is a challenge right now with lockdown for another week in New Zealand. So that's obviously going to present some challenges, but nothing that's insurmountable that we can't get through, we've done it before on a much larger scale. So I'm excited by what New Zealand can throw at us in terms of new projects and new business, as well as Queensland. It's very early days, but it's what we've seen early is encouraging and exciting. And we have a team who are working incredibly hard to deliver upon their objectives.
So now we see FY 'twenty two starting well. I guess, unless there's any other questions, I'll move to some closing remarks, if that's okay, unless there are any other questions that come through on the chat? No? I guess just to reiterate the closing points I made during the presentation. And as I said a moment ago, we are demonstrating that we are a growth company and we're in growth mode and you can see that from our Q4 performance in FY 2021.
As I mentioned a moment ago, we've started strongly and the exit run rate going into FY22 for us is exciting. We have some new markets, some great tailwinds behind us. So from that perspective, we feel we're in a great position. And the reason for that is our value of our offer is compelling in both UK and our APAC markets. We're actively adding new sites, clearly building the pipeline inside new clients, and we're leveraging our technology and expertise and our balance sheet to accelerate our growth and enhanced returns.
So we do expect FY 2022 to be a strong year, a solid year. We are focused on adding those 120 net new sites for this year as well as in FY23 to achieve a 1,000 site target by June 2023. The recovery here in the UK is a tailwind, but of course, as I mentioned a moment ago, and I won't apologize for repeating, it is a disciplined execution of our growth strategy that will deliver long term returns for our shareholders. I guess with that, that concludes the call. Unless there are any other questions people have, I'm very happy to close the meeting there.
Rich and I will be meeting some shareholders today and tomorrow and next day. So if people do want to have a one to one meeting, please let us know and we'll be happy to accommodate where we can. Thank you very much for your time and look forward to speaking to you again soon. Thank you.