The saying was coined by Jonathan Swift in his 1726 novel and remains just as relevant today in the world of parking.
Acquisitions and their integration are challenging at the best of times and Australian companies expanding overseas are no exception. Bunnings’ entry into the UK with Homebase, Boral’s foray into the US with Headwaters and recently Lend Lease writing off $513m on its 1999 acquisition of Bovis Construction in the UK have all been problematic.
Regular readers may recall our 2017 newsletter which looked and rated two significant offshore acquisitions – being Q Park by KKR and NCP/Secure Parking by Park24 from Japan. The latter received a high risk rating due to the extreme multiples paid and also the cultural and country hazards involved.
The future earnings of Secure (before amortisation of goodwill) were forecast at A$11.76m for the nine months to June 2017 ($15.6m annualised), then rising to $19.53m in 2018 and soaring to $22.35m in 2019. In essence, future earnings were forecast to increase by 43% within 33 months. The total purchase price was approximately $212m and apparently 100% debt funded on a 13 times multiple for a business with a WALE of less than five years.
Park 24, together with the Development Bank of Japan, then acquired leading UK operator NCP for £312m in July 2017 – representing 13 times multiple on the March 2017 EBITDA of £23.6m. NCP operated 498 sites and 148,056 spaces. No forecasts were made on future earnings.
And the Development Bank of Japan has a put option over its’ 49% interest in NCP which can be exercised between November 2025 and February 2026 at a cost estimated at 30m Yen – or approximately $A310m to Park24.
Despite having spent well over A$500m on the two businesses to date, profits have been elusive.
Losses from the two acquisitions have increased from A$8.95m to A$12.25m for the six months to 30 April 2023 and 2024 respectively. This included amortisation of goodwill of A$6.45m and A$7.04m.
And when it rains, it pours.
