11/22/2010Redflex Approves Executive Raises, Expects Profit
Redflex shareholders approve compensation package for camera company executives in anticipation of lucrative sale.
Redflex shareholders on Friday approved big pay hikes for the photo enforcement firm's top management at the annual meeting in Victoria, Australia. Redflex has cornered 44 percent of the red light camera and speed camera market in the US, although Arizona-based rival American Traffic Solutions (ATS) is catching up to its down under competitor with a 41 percent market share.
Investors looked past the 92.6 percent drop in profit for the year -- down to just US$437,300 -- in signing off on the executive compensation packages with a show of hands. Karen Finley, the head of US operations, will be paid $498,108, a figure that includes 79,701 shares of stock incentives worth $189,108. CEO Graham Davie will be paid $496,637, including $186,262 in stock. Proxy votes showed very little opposition to these amounts, but there was some controversy over the plan to increase the maximum annual payment to company directors from $396,000 to $693,000. The directors had insisted that they were entitled to the boost because they have been working hard to sell Redflex to a firm like Siemens AG or Macquarie Bank. Although the salary increase passed, 47 percent of the proxies registered their objection. Shareholders are anxious to cash in from a potential sale.
"If and when firm offers are received, the board will assess the offers and determine whether to recommend an offer to shareholders," board Chairman Max Findlay said in his opening remarks. "The board has not made any decision as to the ultimate outcome of the process at this stage and gives no assurance that a suitable offer will be forthcoming from the process."
In the meantime, Findlay explained that his firm would remain committed to its number one priority.
"We have set strategic principles to guide the direction of the company, and the actions flowing from those strategic initiatives are starting to bear fruit," Findlay said. "Key elements of the strategy are: maximizing revenue from existing, new and renewed contracts; identifying new sources of revenue from existing customers."
The firm sees a potential for revived profits now that it has beaten back the lawsuit by ATS, which lost the case on all counts before a jury. Redflex also wrote off the millions lost on the failed Arizona freeway photo radar experiment.
"The contract encountered problems early with delays in access to required court data, resource constraints in the court system resulting in a large number of citations being rejected, intense media and interest group opposition, poor collection rates, with citizens actively encouraged not to pay fines, and many items of proposed legislation introduced that could have had a major negative impact on the program," Findlay said. "As a consequence of many of these issues, the contract ran at a loss."
Redflex also highlighted the growing unpopularity of automated ticketing machines -- as highlighted in the massive loss at the ballot box on November 2 -- as a development that allows Redflex to maintain its competitive advantage. ATS lost one of its largest accounts when Houston, Texas voters ousted red light cameras.
"Most of the cities that do not renew at end of contract have made a decision not to continue photo enforcement activity, and do not move their business to a competitor," Davie said. "We have also seen a small number of contracts terminated for various reasons before end of contract."