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Finance:

Funding:
The companys total funding requirements from the outset are 10,500,000. It is
suggested that the company raises 2,000,000 of this amount equity financing,
and the remainder through a mixture of long term and short term liabilities.
While the company intends to raise a proportion of the share capital amount
from the founders, the company would look to raise any remaining equity
financing requirements through an equity sale in a Series A funding round to
external investors. It is suggested that the funding round be primarily aimed at
venture capitalist firms who specialise in technology and services. This equity
capital cannot be raised in the form of convertible bonds, as the company needs
additional debt capital, and the leverage ratio resulting from convertible bonds
would be unsustainably onerous on the company.
The equity stake raised would be used wholly as capital expenditure (CAPEX),
along with a proportion of the long term liabilities the company incurs, so as to
maintain a leverage ratio with a low cost of capital. Working capital requirements
would be met entirely by short term liabilities which the company would seek to
satisfy at the earliest opportunity.

Capital expenditure:
Item

Unit cost

Cameras
Pole mounts &
installation

1,000

Total units
2,000

Total cost
2,000,000

2,000
500

1,000,000
200,000 metres

Cabling

50

5,000,000
1

Software
Total

1,000,000
-

1,000,000
9,000,000

Unit cost
500
10% of
monitoring
12.5% of
monitoring
1

Total units
2,000

Total cost
1,000,000

Working expenditure:
Item
monitoring
administrative
maintenance
Software licence
Misc.
Total

100,000
250,000

125,000
250,000
25,000
1,500,000

All figures assume an initial pilot project of Westminster Borough, with cameras
covering an average of 5 parking bays each. This would result in the equivalent

coverage that ParkRight currently has cross the Westminster Borough, and
therefore provides a comparison between the 2 companies.

Proposed capital structure:


Liabiliti
es
long term
liabilities

4,000,000

current liabilities

4,475,000

total

8,500,000

Equity
Share capital
total

2,000,000
2,000,000

Projected income statement:

Year 1

Year 2

Year 3

Year 4

Year 5

2,000,000

400,000

400,000

400,000

400,000

1,000,000

50,000

50,000

50,000

50,000

cabling

5,000,000

250,000

250,000

250,000

250,000

Software

1,000,000

1,000,000

1,000,00
0

1,000,00
0

1,000,00
0

1,000,00
0

100,000

100,000

100,000

100,000

100,000

125,000

125,000

125,000

125,000

125,000

250,000

250,000

250,000

250,000

250,000

523,750

332,500

141,250

10,475,0
00

2,175,0
00

2,175,0
00

2,175,0
00

2,175,0
00

2,000,00
0

2,000,00
0

2,000,00
0

2,000,00
0

Outgoings
Capex
camera
installation
pole
mounts

Maintenance
monitoring
manageme
nt
maintenanc
e
Software
licence
Operational
financing

total
Revenu
e
TfL
Council

4,000,00
0

4,000,00
0

4,000,00
0

4,000,00
0

total

6,000,00
0

6,000,00
0

6,000,00
0

6,000,00
0

(10,475,0
00)
(10,475,0
00)

3,825,00
0
(6,650,0
00)

3,825,00
0
(2,825,0
00)

3,825,00
0

3,825,00
0

1,000,00
0

4,825,00
0

P/L
Cumulative

Westminster council is assumed to be willing to pay a minimum of 4,000,000 a


year for Ideeparks services. The council has 200 parking wardens on an average
full time salary of 20,000 each. With Ideepark, the role of these wardens would
be redundant and so the wardens themselves would be surplus to the councils
requirements. The efficiency realised from these wardens would be passed on to
Ideepark. This figure is intentionally conservative and does not factor in the
increase in revenue the council earns from a more omnipresent surveillance
system.
TfLs mandate includes reducing the congestion in central London, part of which
calls within the remit of Westminster council. The congestion charge currently
raises in excess of 250,000,000 a year in revenues for TfL. Therefore an
expenditure of 2,000,000 to reduce congestion by over 20% would be an
enticing prospect for TfL.
It is suggested that the equity holders exit their investment through an IPO of the
company 5 years from launch. Using a basic discounted cash flow model at the
end of the 5 projection period suggests a value of approximately 40,000,000
with a discount rate of 10%. This translates as a 2,000% return on investment for
the initial equity holders. Expanding the project into other councils and territories
will increase this value exponentially due to the synergies realised through
consolidation of software.