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Redflex Profit Plunges 414 Percent
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8/29/2013Corruption Hits Red Light Camera Company Bottom Line
Redflex profit drops 50 percent in wake of bribery scandal.
Redflex Traffic Systems announced on Wednesday that its after-tax profit had plunged 51.6 percent over the past twelve months. The Australian firm continues to reel from revelations that top company management set up a $2 million scheme to bribe the Chicago, Illinois official responsible for the camera contract. As a result, Chicago Mayor Rahm Emanuel said his city would no longer do business with Redflex.
The loss of the world's largest red light camera program has yet to be fully felt in the Redflex financials because Chicago continues to extend its contract with Redflex, despite Emanuel's claim. An extension signed earlier this month expires January 31, 2014, after which the company is bracing for an $18 million loss in ticketing income.
This year's losses were attributed primarily to a $10 million drop in revenue from ticketing operations in the Middle East. Redflex also reported losing $2.1 million on its school bus camera program and paying $3.7 million in legal bills related to the Chicago bribery scandal. In 2012, Redflex banked $15.1 million in after-tax profit. That dropped to $7.3 million this year, which means the Chicago loss will send the company deep into the red next year. Redflex identified its top priorities in light of this development:
"Sustainment of the USA business in light of the reduced revenues and possible contagion effect arising from the Chicago issues," Redflex listed in its statement to investors. "Maximization of revenue from existing, renewed and new contracts. Investigation of new sources of revenue from existing customers."
This year, the number of red light cameras installed in the US dropped 1.1 percent, costing the company $1.8 million in expected ticket income. In addition to Chicago, Redflex this year lost Cary, North Carolina; Globe, Arizona; and Hayward, California.
"The slowing rate of new installations within the USA market has reduced the demand for capital to service that market," the company told investors. "Redflex continues to face the challenges raised through local voter initiatives and referendums. Consistent with industry dynamics, during FY2013, citizen initiatives prevented several Redflex contracts being renewed after their terms expired... There is also potential for revenue loss from other municipal contract terminations that may arise as a result of the disclosures associated with the investigative findings, although this has not been significant to date."
Despite the lackluster performance, CEO Robert DeVincenzi was handed a $600,000 bonus on top of his $450,000 base salary.
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