RE:Kapsch's balance sheetJusthalffull wrote:
Kapsch's balance sheet Kapsch's balance sheet is likely a reflection of the fact that the ITS business is not that profitable a venture. So let's get the Apple payment in the bank so that I can dump the last of this POS that I own, before they have a similar balance sheet.
and then added:
Sale of Wilan or receipt of Apple settlement means the reinvented value into ITS is 0 This is a money losing business venture. None of the ITS companies are making any significant income. Show me who is? These remarks raise legitimate questions about the ITS industry.
So, Justhalffull, to give you the answer to your last question, TransCore has been resoundingly profitable. Here is from the press release announcing its acquisition (2021-10-03) by ST Engineering:
Details of the Acquisition
The Acquisition translates to a EV2/EBITDA3 multiple of 16.2 times after accounting for tax benefits.
Based on the unaudited financial statements of the TransCore business for the six (6) months ended 30 June 2021, the profit including discontinued operations that have not been disposed and before income tax and non-controlling interests is approximately US$54 million (S$72 million).
If you want to see more, take a look at this:
https://www.stengg.com/media/1318188/st-engineering-egm-presentation.pdf
That said, this is a tough industry. People have noted Kapsch's troubles. Take a look also at Q-Free (Norway) which has lost money consistently for around a decade.
My impression is that Q-Free is just a case of bad management.
As for Kapsch, if you go back to 2017-ish it was massively profitable. My sense is that since then it has especially suffered from bad management. Take a look at this from the CEO letter in their 2019/20 annual report:
The financial year was very positive in the beginning. We managed to fill the vacated position of Chief Technology Officer in-house with Alfredo Escriba. The financial figures announced in the first quarter for the previous financial year were very good. However, right when we were presenting record revenues and a pleasing EBIT development for 2018/19, the European Court of Justice (ECJ) published a surprising decision with far-reaching consequences: The infrastructure charge (passenger vehicle toll) in its planned form, where in Germany accred- ited vehicles receive a tax relief simultaneously, violates the principles of the European Union. On the following day, the customer terminated the contracts for the implementation and operation of the passenger vehicle toll effective September 30, 2019. Taken together, the projects associated with the passenger vehicle toll would have been among the largest in the company history of Kapsch TrafficCom.
In Zambia, we were unable to develop the business as originally planned. We finally had to admit that it will be impossible to overcome regulatory hurdles in the foreseeable future. As a result, the anticipated business prospects in this country are also disappointing. It is for this reason that we have made impairments regarding our involvement in Zambia.
Over the course of the financial year, our struggles with the consequences of insufficient personnel levels in the US intensified. For quite some time now, the company has been unable to recruit enough adequately qualified personnel at reasonable con- ditions. We were already looking for 150 people at the beginning of the financial Very successful on the market, but year (with a total workforce of nearly 650). Thanks to a changed recruiting darn it: the team is not big enough. strategy, we were finally able to increase the workforce in the US (excluding Streetline) by 145 people for a total of 790. However, this did not come close to filling all of the open positions, since the need for new employees continued to rise due to the good intake of orders and the positive business outlook.
. . . . . . . .
At the end of November 2019, our contract to operate the nation-wide toll system in the Czech Republic expired. In addition, our attempt to implement and operate the new toll system failed due to what we regard as an extremely questionable awarding of the contract. Despite some legal successes along the way, we were ultimately unable to assert our interests. Nonetheless, we cannot accept how we were treated and will continue to take legal action. The fact is, however, that a project with annual revenues of more than EUR 70 million has come to an end.
This looks to me like a disaster of bad management.
Takeaways from this? (1) Quarterhill has been right to insist on top quality in ITS acquisitions. (2) It's possible, like TransCore, to achieve big returns in this competitive industry--especially given the tailwinds we're looking at over the next 5-10 years. (3) The company should study, with great care, the history of what has gone wrong at Kapsch and Q-Free, among others. (4) Bret is going to have his work cut out for him.