[/table] 1H17 result: Statutory NPAT of A$0.4m (1H16: NLAT A$1.2m) compared to our forecast NPAT of A$0.8m. Adjusted EBITDA (pre-non-recurring items) of A$2.1m (1H16: A$0.1m) versus our forecast of A$2.3m. No dividend was declared as expected.Key takeaways: 1) an in-line result, although inflated by a pre-tax gain of A$0.3m following the favourable settlement of a legal dispute; 2) in constant currency terms, 1H17 revenue was down 2% pcp whilst EBITDA increased by A$2.8m despite the loss of the Asda contract; 3) profit from the loss of the Asda contract has now been recovered on a run-rate basis – this negatively impacted 1H17 by A$0.6m; 4) new disclosure around the number of parking infringements should assist modelling; and 5) redirection of ex-Asda technology equipment to other SPZ sites nearing exhaustion, but cash has been bolstered from the recent raising.UK Management Services (87% of gross 1H17 revenue): Revenue of A$10.8m (-27% pcp) and Underlying EBITDA of A$3.5 (+22% pcp). The decline in revenue is attributable to the loss of the Asda contract in 2016 and FX movements. Notwithstanding the adverse movement in revenue, EBITDA has enjoyed a positive trend due to new contracts won over the last 12-18 months but more particularly the roll-out of technology to around 200 sites at the end of 1H17 versus 80 at 1H16. SPZ has cited a 79% pcp increase in the number of parking infringement notices in 1H17 to 173k. Infringement revenue accounts for around 75% of divisional revenue.Technology Division (13% of gross revenue): Gross revenue of A$2.2m (1H16: A$1.6m) with sales to external customers of A$1.6m (1H16: A$0.9m) and underlying EBITDA of -A$1.1m (1H16: -A$1.6m). SPZ stated that about A$1m of the divisional revenue was recurring in 1H17. Revenue growth has been driven by a range of new contract installations in FY16 as previously announced – ACT, Mosman Council NSW, Auckland Transport etc. Outlook: No specific numerical guidance for FY17 as is normal. At the divisional level, UK Management Services: Apart from the potential to win new sites, the focus will be on adding technology to a further 100 managed sites in 2H17 on top of the 200 sites already installed. Technology: apart from citing a strong pipeline of new prospects, the balance of FY17 and beyond will benefit from recently won contracts such as Cardiff and Leeds Councils in the UK, Coles Supermarkets and Wilson Parking NZ.Changes to forecasts: Downgrade to FY17 and FY18 forecasts by 6% and 2%, albeit from a low base. Changes largely due to FX assumptions.Investment view: BUY call retained with a revised DCF valuation of A$0.42 (prev. A$0.40) and unchanged price target of A$0.40. Whilst the profit trajectory of UK Management Services is well established, we expect that announcements of further contracts in the Technology Division will be the key share price driver.Click here to read full report [/table][/table]
SPZ Price at posting:
29.5¢ Sentiment: None Disclosure: Not Held
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