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6/5/2009
Traffic Camera Companies Hit By Recession
Photo enforcement giant Redflex reports ten-percent drop in profit while Nestor goes belly up.

Jonathan N. SavageOnce considered impervious to recession, some photo enforcement companies now are showing signs of distress during the ongoing economic downturn. Long-struggling Nestor Traffic Systems has been the worst hit. On Wednesday, a Rhode Island superior court judge appointed Jonathan N. Savage, a partner with the Shechtman Halperin Savage law firm, to take charge of selling the failed company. Former members of Nestor's inner circle have pointed fingers at the company's leadership.

"In the past twenty months you and the board have removed Nestor from the industry as a competitor, broken crucial strategic partnerships, ran the company out of money, lost customers, defaulted on its debt, but somehow, managed to increase senior management compensation during this time frame," former Nestor CEO William B. Danzell wrote in an open letter to the company's CEO in March.

The firm's impending bankruptcy was first revealed in February when Nestor failed to pay subcontractors for work performed in Fullerton, California. The company also backed out of a recently secured contract with the city of Lima, Ohio.

While still profitable, Redflex Traffic Systems, a company based in Melbourne, Australia, is no longer pulling in the impressive growth figures delivered in the past. For 2009, the company predicted it would boost profits by 40 percent. Instead, it delivered profit 10 percent lower than the previous year. The company pointed to trouble with Arizona speed cameras and the sinking value of the US dollar as the prime culprits.

"Redflex' financial performance in the Arizona statewide program has not met original expectations due to: the removal of mobile enforcement vehicles as mentioned above; the hold on the anticipated rollout of 24 additional fixed camera systems; and technical issues causing delays in receiving information from the various courts in the state," Redflex Chairman Chris Cooper explained in a letter to Australian shareholders. "Although the medium to longer term prospects for the Arizona program appear to be very good, the program will not meet original expectations this year. Also, the Australian dollar has firmed against the US dollar in recent times, although exchange rates obviously remain volatile."

Cooper insisted that the company had plans for massive growth as more local jurisdictions turning to red light camera and speed camera programs in the tough economic times. The company is enticing cities like Phoenix, Arizona with the possibility of ramping up the number of tickets issued with "secondary violation capturing and processing." That means the existing automated camera systems will begin issuing extra tickets to drivers who fail to wear a seatbelt, drive without both hands on the wheel or have a burnt-out turn signal. Such tickets are commonly issued in England, which has even issued tickets to drivers accused of making an obscene gesture toward a speed camera.

"Redflex is the most qualified partner for the city to vastly expand upon the current scope of the program to include large-scale rollouts of new enforcement solutions such as the ones highlighted above," Redflex Holdings Board Member Karen Finley said in a statement on Monday.

With the company's financial health tied so intimately with Arizona speed camera programs, passage of the CameraFraud.com referendum banning photo enforcement in the state would be devastating to Redflex stock which currently trades at A$2.18 (US $1.75) a share on the Australian Securities Exchange.




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