Road traffic and all the associated apparatus that goes into creating tidy roads is generating strong returns for Traffic Technologies (ASX: TTI).
The company has just announced a handful of orders totalling $1.2 million through its subsidiary, QTC Traffic Solutions.
QTC has been chosen to supply traffic controllers to Singapore and Qatar to be delivered by the end of June this year, with QTC saying it wants to establish a “growing presence in the lucrative ITS world market” as a result of its gradual overseas expansion and winning a series of export initiatives.
Combined, the two jurisdictions have asked for an additional 2,700 signalised intersections that operate as part of an overarching “adaptive traffic management system”.
QTC’s Hadron traffic controllers already constitute 40% of the Singapore market and 28% of the Qatar market, making the ASX-listed company the most dominant traffic apparatus provider within these countries.
Commenting on the order, Traffic Technologies Managing Director Con Liosatos said: “In line with the company’s objectives in diversifying revenue streams and increase presence in the overseas markets, this order is the latest in a series of export initiatives which QTC has won. The company has established solid ground for future endeavours in the lucrative ITS world market.”
Joining the on-ramp to Traffic growth
Traffic’s expansion of its activities in Singapore and Asia reaffirms the company’s strong financial performance over the past financial year.
Traffic raised its annual revenue by 25% to A$28.1 million and saw its profit after tax swell by 372% up to $717,000.
Over the past two years, its EBITDA figure grew from A$1.1 million in the first half of FY2016 to A$2.4 million in the first half of FY2018.
The solid growth and company metrics reported by Traffic underline several important themes that continue to sustain a strong business climate for Traffic’s operations.
There are now well over 1 billion vehicles globally and growing rapidly on the back of falling manufacturing costs, the introduction of electric cars and a growing world population that is disproportionately attracted to urban areas with already-growing traffic issues.
Traffic congestion is becoming more problematic in most urban areas across the world and between cities along main roads that cannot be expanded quickly or cost-effectively.
Furthermore, poor traffic management can negatively impact other business activities, slowing down distribution and access for all other consumers and businesses.
According to the World Economic Forum (WEF), car ownership could grow by as high as 600 million by 2025. By 2050, the number of cars being actively used globally could rise to as high as 4 billion.
This trend is likely to create several market impacts which Traffic Technologies wants to capitalise on; namely road/street lighting solutions, IoT sensors, signage and developing the next generation of adaptive management systems that can adapt to traffic conditions in real-time via the use of sensors, video cameras and location data obtained from drivers’ devices.
The WEF says the cost of all traffic jams is estimated to be around $1.4 trillion per year which has meant national authorities investing a significant part of their budgets to alleviate the problem, especially in the most key business areas.