Interpark all set for push into Africa
INTERPARK has cornered 70% of South Africa’s parking management market, a hefty share of what appears to be a lucrative business.
Now, Interpark is about to extend its experience in running high-density parking lots to the rest of the continent — underscoring South Africa’s head start in urban infrastructure development over its African peers. And, if the Africa growth projection is to be believed, Interpark stands to roll in the profits by rolling out the booms.
Interpark currently has contracts to manage 240 parking sites in South Africa, Swaziland and Botswana.
Kate Wolfaardt, managing director of Interpark, said the company was introducing its centrally managed payon-foot model on the continent. If it is anything as profitable as it is in South Africa, this could be a big boon for the company. Wolfaardt said a superregional South African shopping centre could see more than 30 000 vehicles in a day— equating to about R250 000 a day in takings.
“Revenues vary greatly between buildings as a result of the tariffs landlords charge, arrangements for free parking with anchor tenants and the volume of vehicles moving through the site,” she said.
Despite her reluctance to disclose fee arrangements with landlords, on the surface it looks like a cushy position. Wolfaardt said that although a typical parking services contract runs for two to five years, there is not a lot of churn in the industry because parking companies build up operational understanding at sites and can offer ongoing improvements on service and better pricing to keep contracts.
Interpark is part of the Excellerate Property Services group— a collection of property services companies that cross-sell services of everything from facilities management to cleaning — which is part of Excellerate Holdings. The holding company delisted from the JSE in October 2012.
When Excellerate Holdings offered to buy back minority shares at 115c in July 2012, small-cap equity analyst Keith McLachlan called the delisting “opportunistic”, and questioned if Excellerate Holdings was taking advantage of minority shareholders after it had used the capital it raised to build operational capacity by making several acquisitions.
McLachlan said the group was poised to return good profits and an increased return-on-equity just as it announced its offer to delist. At the time, Excellerate claimed an independent third party had valued the shares at 100c each, which made the buyout offer of 115c look attractive.
“I don’t think — despite the opinion of the ‘ independent experts’, whose fees were paid by related parties — that the ‘conditions of the offer are fair and reasonable to Excellerate shareholders’. Are those the majority or the minority [shareholders]?”
McLachlan argued that the model used to calculate Excellerate’s value assumed that the past was an accurate reflection of the future.
Yet Excellerate had previously been refining its strategy, building or buying operations and growing critical mass.
“If your opinion is that Excellerate is now settled on its business model — it has established its operations and it has reached critical mass or is well on the way there — then the future of Excellerate looks much more profitable than the past,” he said.
McLachlan’s alternative calculation suggested fair value for Excellerate would have been 146c per share, and that the delisting price was below the net asset value per share of 123c. Was this a case of minority shareholders being taken advantage of in an opportunistic delisting to “hoard the upside for themselves”?
Excellerate Holdings CEO Gordon Hulley said the delisting is water under the bridge now, and some shareholders chose to remain invested, even after the delisting.
“We were a small listed company, not making enough money to attract the kind of capital we wanted through our shares and we were not liquid enough.
“The costs of maintaining a public listing were too much and the executive team required to attend to governance meant we were not getting any value from being listed. It wasn’t controversial,” Hulley said.
“Many investors stayed and will benefit if our strategy proves successful. It gives us more capacity to use our resources and implement our strategy. It was never done to push people out — the value we were getting from being listed and the cost of remaining a listed entity were not worth it.
The shareholder profile has remained similar.”
Since October 2012 and the finalisation of the delisting, Excellerate has got rid of non-core assets and formed the property services holding company. Hulley said parking was not the largest contributor to the group, but its earnings were material.
“We have a significant share of the outsourced parking market, but we also have healthy competition from companies like Spark and Afripark.”