Strong financials give Traffic Technologies the green light for bullish new year

A strong order book and growth in government infrastructure projects has underpinned improved full year results for Australian traffic hardware and software solutions provider Traffic Technologies (ASX: TTI).

The group’s trading revenue improved by 18% to $52.3 million compared to the previous corresponding period and EBITDA (earnings before interest, taxation, depreciation and amortisation) improved by 222% to $4.5 million.

Net profit after tax was posted at $200,000 and compares to a loss of $13.8 million in the previous year.

Demand for the group’s products and services increased during the year despite COVID-related lockdowns and travel restrictions which resulted in a global shortage of electronic components and impacted the import of limited parts.

An increase in nationwide road infrastructure spending kept the order book strong and saw long-term supply contracts secured with state and local government agencies, major power companies and contractors.

Further improvements

Traffic Technologies managing director Con Liosatos expects the positive wave to continue as governments commit to new infrastructure and international restrictions are eased.

“Despite lockdowns and construction shutdowns in major states as well as disruptions to [our] supply chain, [we have] has made a bullish start to the 2022 financial year with a strong order book and term contracts in place,” he said.

“The outlook is very positive, and we are well positioned to benefit in the years ahead from increased investment by government on infrastructure programs to assist economic recovery and new products being developed by our team.”

Solid term contracts

Mr Liosatos said a string of solid term contracts awarded during the period is expected to feed the group’s earnings base in future years.

In April, Traffic Technologies won a $1.3 million deal with Victoria’s Department of Transport for the supply and installation of electronic speed limit signs (inclusive of software and other associated works) at schools and shopping precincts across Melbourne.

That same month, its wholly-owned subsidiary Quick Turn Circuits secured export orders from China, Singapore, Chile and Qatar for the supply of more than 300 traffic controller units and associated intelligent software to the value of $1.7 million.

May saw the group accept a contract with the Acciona Rail joint venture (between Acciona Infrastructure Projects Australia and Coleman Rail) for the supply and installation of intelligent traffic systems in connection with a level crossing removal project at the Melbourne suburb of Edithvale and a possible rail extension through to Port Phillip Bay.

It also shelled out $750,000 to acquire the intelligent transport systems business of Artcraft Pty Ltd, focused on the design, development, manufacture and supply of electronic road signage and software systems.

Around the same time, group subsidiary Aldridge Traffic Systems won an initial two-year contract with Rotherham Metropolitan Borough Council in the UK to supply state-of-the-art “Smart City” iCells to control street lighting in the area.

In July, the group announced that a $15 million contract signed in 2018 to supply low-wattage LED street lights across Tasmania through state-owned TasNetworks had been extended for a further 12 months to the value of $3 million.

“Our future earnings will be underpinned by these recent wins [plus] long-term supply contracts, orders from state and local government agencies, power companies and next generation LED street lights with lower wattages to deliver greater economic benefits,” Mr Liosatos said.

“This next generation of ‘smarter and greener’ luminaires will also have the added benefit of running on solar and performing to a high standard across Australia’s road network.”

Specialist services

Traffic Technologies specialises in the design, manufacture and installation of traffic signals and controllers, pedestrian countdown timers, electronic road signs, emergency telephones, road lighting products and “SmartCity” control systems.

It also supplies a wide range of directional and regulatory traffic signs and traffic control products to road traffic authorities, municipal councils and construction companies.

The group is a key supplier to Australia’s road signage market with manufacturing bases in Victoria, Western Australia and the Northern Territory and clients including state road authorities, local councils and construction companies.

Its products are also being exported to an increasing number of international customers.

SmartCity platform

Traffic Technologies’ proprietary Traffic SmartCity Technology (TST) platform allows for the integration of street lights and other traffic management equipment to a central control system via remote Internet of Things (IoT) sensors.

The platform enables users to monitor and control thousands of assets linked through a secure private network as well as detect traffic flows, parking availability, and environmental and waste management issues.

TST has found favour with road authorities, councils and power companies due to its ability to fully utilise and maintain critical assets cost-effectively and in real time, driving financial savings and higher utilisation of assets as well as a reduction of greenhouse gases.

During the year, the platform was rolled out across South Australia and the eastern states, with the footprint increasing to include councils boosting annuity revenues by 13%.

The group has also identified a number of opportunities to supply the technology to new overseas markets including Asia and South America.

“Our system continues to gain traction across several regions with the implementation of large-scale infrastructure projects going live in the coming quarters,” Mr Liosatos said.

Share placement

At the start November, Traffic Technologies announced the completion of an initial share placement to raise $2.17 million via the issue of 72.33 million shares at $0.03 each.

A non-renounceable rights issue at the same price per share to raise up to $10.13 million opened on 11 November.

The rights issue gives shareholders the opportunity to subscribe for seven new shares for every 10 held and will close on 30 November.

Melbourne-based wealth management firm First Samuel committed to take up part of any shortfall in the rights issue to the value of $1 million, or approximately 33.33 million shares.

Funds from both raisings will be used for working capital and accretive and strategic acquisitions, and to reduce debt by more than 60%.