Traffic Technologies Secures $25m Contracts Amid Strong Cost Savings
Traffic Technologies reports a robust order book with long-term contracts and significant cost reductions, despite ongoing working capital challenges.
- Order book exceeds $25 million with contracts up to nine years
- Annualised cost savings of $4.2 million achieved since FY24
- New $3 million USD convertible note and $8 million trade finance facility secured
- Awarded $3 million Smart City IoT LED streetlight contract with Sydney City Council
- Half-year revenue impacted by capital constraints but demand remains strong
Strong Order Book and Long-Term Contracts
Traffic Technologies Ltd (ASX: TTI) has revealed a solid foundation for future growth in its latest quarterly report for the period ending 31 December 2024. The company’s order book remains robust, with forward orders exceeding $6.8 million and several long-term customer contracts valued at over $25 million, some extending up to nine years. Notably, Traffic Technologies secured a significant contract to supply Smart City IoT-ready LED streetlights to Sydney City Council, initially valued at $3 million over five years, with options to extend up to $5 million over nine years.
Cost Reduction Initiatives Yield Tangible Savings
Amidst a challenging capital environment, the company has aggressively pursued cost efficiencies. The consolidation of manufacturing operations in New South Wales has been completed, contributing to an ongoing cost reduction program. Traffic Technologies reported annualised cost savings of $2.2 million in FY24 and an additional $2.0 million in the first half of FY25, with expectations to reach up to $6 million in annualised savings by the end of FY25. These measures are critical to improving margins and operational resilience.
Capital Raising and Financing Facilities Strengthen Liquidity
To address working capital constraints that have impacted revenue, Traffic Technologies undertook several financing initiatives during the quarter. These include a $3 million USD convertible note agreement and a share placement with the Season Group, a Hong Kong-based electronics manufacturer. The Season Group also extended an $8 million trade finance facility and an additional $3.4 million loan facility at 12% interest, expected to be drawn in February 2025. These funds are earmarked for acquiring equipment and materials to meet existing contracts and support working capital needs.
Revenue and Cash Flow Dynamics
Revenue for the half-year ended 31 December 2024 was $9.9 million, reflecting ongoing pressure from capital constraints despite strong demand driven by federal and state government infrastructure investments. The company’s cash flow was notably affected by advance payments to overseas suppliers to secure priority in component deliveries. Net operating cash outflow for the quarter was $3.3 million, partially offset by net financing cash inflows of $3.7 million. Cash and cash equivalents stood at $341,000 at quarter-end, with unused financing facilities of $12.4 million providing a buffer for the coming quarters.
Looking Ahead
Traffic Technologies is positioning itself to capitalize on the growing Smart City market with continued investment in its software and product portfolio. The company’s strategic focus on cost discipline, contract wins, and financing arrangements aims to stabilize operations and unlock growth potential. However, the reliance on external financing and working capital management will remain key factors to monitor as the company executes its plans.
Bottom Line?
Traffic Technologies’ strong contract pipeline and cost savings set the stage for recovery, but working capital pressures remain a watchpoint.
Questions in the middle?
- How effectively can Traffic Technologies convert its strong order book into sustained revenue growth?
- What impact will the additional $3.4 million loan facility have on operational capacity and delivery timelines?
- Will the company’s cost reduction program achieve the targeted $6 million annualised savings by FY25 end?
