Executive Board report
Very good results
Q-Park closed the 2015 financial year with very good results. We were able to maintain the upward trend that commenced in 2014 in revenue growth, operational result and operational cash flow. The revenue increased by 5.2% compared to 2014 and came out at EUR 809.1 million.
The operational result is EUR 174.9 million (2014: EUR 174.7 million). Corrected for the additional lease costs (approximately EUR 8.5 million) as a result of the sale-and-leaseback transactions conducted in 2014, this represents a growth of approximately 5%. The net result grew from EUR -227.7 million to EUR 90.9 million.
We are perfectly on schedule with the four-year plan that our shareholders approved in 2015.
The development of Q-Park's operating result is closely related to the development of GDP. In 2015, GDP rose in the Eurozone by 1.6 per cent and throughout the European Union by 1.9 per cent (source: Eurostat). These are signs of an early recovery in the European economy.
The economy in Europe is growing faster than predicted with the exception of France and Finland where economic growth remains just above zero. Lower oil prices are having a positive effect on cost levels for businesses and consumers alike. A lower oil price means more disposable income for consumers and lower fuel prices. Low interest rates also encourage more investments and spending.
Consumers have greater confidence, spending is increasing, but they are making their purchases through a variety of channels. The share of online sales showed continued strong growth and we can expect this trend to continue in the coming years. Yet the numbers of visitors to our parking facilities continues to grow; people still want the city shopping experience.
The European political arena was dominated by the increasing flow of refugees and the fear of terrorist attacks. Paris and Brussels were directly affected in November 2015 and were subsequently confronted with lower numbers of visitors. Other cities, including London, Amsterdam and Berlin were also affected by a slight decrease in visitor numbers. This decline was temporary, and in December, normal life resumed again.
Turbulence in the financial markets continued and the volatility is likely to persist in 2016. Everyone is warily watching what's happening in China and the potential consequences for the global economy. The ECB's generous monetary policy is under pressure and inflation remains low. Inflation is mainly influenced by the lower oil and energy prices, which are now considerably lower than a year ago. Low inflation limits our opportunities to adjust prices.
Interest on government bonds is extremely low, with some banks even charging a negative interest rate. This has a positive effect on the attractiveness of property as an investment category, which yields a higher return than fixed-interest securities.
Developments in the car parking market
The parking industry is developing rapidly towards 'Smart Parking'. The industry is adopting high-end automation solutions and online applications for making reservations and paying for parking spaces.
'Smart parking' makes proactive use of the data and information available to inform customers and to guide them to a vacant and affordable parking space, as close as possible to their final destination. Smart parking also facilitates integration with other mobility solutions. It thereby contributes to improving the accessibility of urban amenities and improving the quality of life in the urban living environment.
Government and the business community jointly face the challenges to improve the accessibility of cities. Increasingly, municipalities as well as transport and parking operators are seeking the balance between public and private transport and between slow (walking and cycling) and fast (car, train, bus, taxi) transport.
Governments are continually striving to reduce the presence of cars in the public domain. Shops, offices and institutions endeavour to be accessible for their customers and clients. Smart parking also seeks opportunities to resolve these sometimes paradoxical requirements.
New mobility models, direct and indirect access and payment options, changes in car ownership and car use, development of autonomous and interconnected cars, care for the environment and attention for sustainability; all these trends have an influence on the car parking market. The social and technological trends are clear; providing parking services is more than just parking cars.
In addition to implementing relevant innovations, parking experts are increasingly concerned with improving conditions for cyclists and pedestrians, integrating with public transport, managing traffic flows for special events and providing facilities for shared cars and recharging.
There are seven major international parking companies in Europe. Q-Park, Apcoa and VINCI Park (since November renamed to Indigo) head up the list. At urban level, municipalities are usually the largest party who provide paid and/or regulated parking.
Developments at Q-Park
For the Q-Park organisation, 2015 was a year of change. The structure with the four regions has developed whereby the management direction has changed. Focus on the return on investments and on increasing the operational cash flow has had the desired result. In the meantime, we continue to focus on innovations in contract types as well as in technology that give us a lead. Our aim is to be a value player who provides financial stability in combination with operational flexibility.
The company-wide focus on operational cash flows has led to considerable improvements. We also see that the budget discipline has improved. Partly due to the refinancing, and the focus on cost management and return on investments, the predictability of the results has also improved.
The number of parking facilities increased by 53 to 6,195. The number of parking spaces is 835,626. By sharpening the focus on the return on our portfolio, the income per parking space increased in all regions.
Investment property results
The differentiation between successful and less successful cities is becoming more evident. Our strategic focus on A and B cities is paying off. Agreeing new and strategic contracts continues to be a major concern in all countries to maintain the vitality in our portfolio.
Due to increased competition in all market segments, investing in existing parking facilities that perform well remains a key asset, and emphasises the importance of owning the parking facilities at strategic locations in A and B cities.
The total comprehensive income after taxes rose to EUR 130.5 million (2014: EUR -207.9 million). The tax component of the total comprehensive income amounts to EUR -32.4 million (2014: EUR 7.6 million).
Due to the successful refinancing and additional repayments on existing loans where possible, the financing costs dropped sharply compared to 2014, from EUR -82.1 million to EUR -63.3 million in 2015.
The shareholders' equity rose to EUR 1,285.6 million (2014: EUR 1,155.1 million).
The total investment property portfolio is valued at EUR 5,642.6 million (2014: EUR 5,293.9 million), including the minimum lease obligations recognised of EUR 2,868.9 million (2014: EUR 2,598.8 million). The market value of the investment property is EUR 2,771.2 million which includes EUR 1,253.0 million of legally owned property.
We have configured the company's ICT so that we can take maximum advantage of our scale of operations by introducing more uniformity in the processes and systems while maintaining the flexibility to respond to local customer needs or differences in the market. For this we are developing a uniform back office application.
The first phase is the season ticket system Contact to Contract that went live in the United Kingdom and Ireland in December. In 2016, this system will be rolled out in the other regions, starting with the Northern European countries. This will enable us to better serve our regular customers.
Payment card reader in PMS
In order to manage our payment transactions properly and efficiently, in accordance with the payment card industry, we have developed a payment card reader and implemented this in our PMS. With this, we can offer our customers convenient payment options while we encrypt payment card data to protect it. The card reader is certified (by PCI SSC and EMVCo) and also supports contactless payments.
During the biennial EPA award ceremony, Q-Park received two prizes. The French car park Pré des Pêcheurs in Antibes won a special jury prize and the Dutch Open Data Platform project won the innovation prize.
Q-Park has analysed the opportunities in the market to optimise the existing portfolio and, where possible, to take advantage of economies of scale. The results of these analyses and the accompanying strategic guidelines have been incorporated in the Q-Park Business plan. Our strategy for the coming years is also based on a number of megatrends which will influence the future of the car parking market. The trends include digitisation, urbanisation, shopping experience, sustainability developments and developments in the car industry and car usage.
Q-Park endeavours to create added value for its shareholders and other stakeholders. To achieve this, the key assignment for senior management is to increase free cash flows from the existing portfolio.
New contracts will be assessed based on portfolio management and must meet stringent return requirements. An internal investment committee assesses all investment applications before being submitted, together with a recommendation, to the executive board.
The primary objective from the customer perspective remains to offer the parking customer an even better service and to optimise customer convenience.
The supervisory board appointed Mr Marcello Iacono as CFO per 1 October 2015. He replaces Mr Rob Vroom who fulfilled this position on an interim basis since 2013.
New themes that cross our path
With the climate agreement in Paris, steps towards a sustainable fossil free economy seem to have actually been set. Dependence on fossil fuels will diminish.
It goes without saying that we keep a close eye on the influence of new technological developments in parking, such as self-driving cars and car sharing.
For the longer term, it is important that we underpin our position of solid value player with a stable cash flow, robust financing and a cost-effective investment property portfolio. With this, Q-Park will become less dependent on fluctuations in the economy and our results will be more predictable.
It is exactly in these times, with social and technological developments emerging in rapid succession and when little is certain, that Q-Park will and can be a qualitative and functional anchor that stakeholders can rely on.
Q-Park is a strong brand with an excellent reputation whereby we continue to guarantee the Q for 'Quality' for our customers.
Theo Thuis - COO
Maastricht, 16 March 2016