McIntosh also held no real fear of the government's proposed Traffic Control Centre (TCC) becoming a threat to Trafficmaster's supply of traffic information either. In fact, McIntosh was more than happy to point out that the TCC had "no traffic detection capability". Indeed, when asked if he could kill off any competitor or technology with a silver bullet, McInstosh confidently stated: "As trite as it sounds, we don't need a silver bullet."
Europe
Trafficmaster raised over £60m last year to expand its network of sensors into Europe. McIntosh explained how the demands of the motor industry prompted the Continental rollout:
"The UK market, in terms of the volume market, is constrained because motor manufacturers are not prepared to fit equipment as standard if it is only going to apply in one small part of the [overall] marketplace... The motor manufacturers want Europe. And if you can only offer them the prospect of something in the UK, you're not at their table."
Although networks are soon to be built in France and Italy, it is Germany that McIntosh sees as key to European success. "Germany is a hugely critical marketplace... About 25% of all cars in the European Union are located in Germany. About 25% of all new cars sold in the European Union are sold in Germany. But about 60% of all decisions that relate to what goes into cars are located in Germany."
The German network is now "up and running" and is expected to generate revenues in the final quarter of this year. But it's not been all plain sailing.
Mannesmann
In 1997, Mannesmann became the exclusive Trafficmaster licensee in Germany and was able to use Trafficmaster's technology to develop a network of sensors. However, Mannesmann didn't entirely replicate Trafficmaster's efforts in the UK and the resulting data quality suffered. So Trafficmaster subsequently built a separate network, fully operated under their control. And that left Mannesmann to run its network by itself, but still under licence to Trafficmaster.
And although Trafficmaster still works alongside Mannesmann within another joint venture, McIntosh confirmed that the former partner could now be seen as a fixed network rival: "Mannesmann are, today, in competition with us but only in Germany. But we now control the quality of the data we use in Germany. It is such a key part of our business. We see what has happened as a major positive... It is a significant step along the road."
The "change in status" in Germany meant Trafficmaster giving up £800,000 in first-half Mannesmann licence fees. But McInstosh considered that, for the long term, it was income worth losing:
"What a Trafficmaster shareholder gets for that £800,000 is 90% of a company that owns a network in Germany and is actually dealing face-to-face as principal with motor manufacturers. If one looks at the valuation of Trafficmaster and one looks at the future of Trafficmaster, that £800,000 isn't relevant."
Other activities
McIntosh also took the opportunity to describe the other Trafficmaster products: "We provide a range of other telematic services -- Fleetstar, Trackstar, e-call and b-call. We have in the UK today the only electronic emergency call and breakdown call services."
McIntosh forecasts "strong growth" for the company's Trackstar motor tracking device, claiming: "We expect Trackstar to be profitable in the year 2001, within 18 months of launching it. To date, we have fitted 3,000 units." Elsewhere, "strong growth" was also expected of Fleetstar, a system that provides information to car fleet managers. Here, "revenue will start to accelerate in 2001".
McIntosh also outlined the possibilities of the remote diagnosis of cars, or the remote opening of car doors, for the motor manufacturers. However, he doesn't see Trafficmaster losing its focus on the supply of traffic information.
"There are a number of motor manufacturers... who want us to offer them, not just help in traffic information, but help in other areas. So we have a number of services available, because we can offer synergies," McIntosh remarked, clarifying: "But we recognise they are not core activities."
Nevertheless, exploiting related and associated technologies can "generate... quite nice profitability" for Trafficmaster.
Prospects
Trafficmaster announced at the latest interim stage that it expected a trebling of its revenues throughout 2001. The rolling out of its networks into Europe is the foundation for this near-term optimism. Further out, McIntosh pointed to independent research that described what the future could have in store for traffic information.
The forecasts suggested that by 2005, 3m subscribers could have a screen-based system at £76 per annum and 6m subscribers could have a simple voice-based system at £20 per annum. Taking both of those projections together equates to hardware in only 4% of the total European car parc.
From the UK experience so far, McIntosh underpinned the validity of the forecasts: "We believe that these figures are not at all unreasonable, but we recognise there are other views. We are probably at the bottom end of expectations. And on top of that we've got all of the other services... Do the sums... and do you believe them or not? That's the opportunity."
Summary
Although Bill McIntosh is the Finance Director of Trafficmaster, I'm sure he could "stand in" as the marketing director if ever the need arises. Throughout the meeting, his enthusiasm for his company and the services it provided never wavered. He spoke, sometimes in a very robust fashion, at great length about the industry, the competition and the potential. For setting aside a whole morning to do this, I extend my thanks.
Although I've only seen one side of the story, I'll need some convincing to take the view that Trafficmaster will lose its dominant position in the supply of traffic information anytime soon. But the question I have is not whether Trafficmaster will eventually have its information available to most drivers. Instead, it's the question of whether the subsequent take-up of the service by the public will meet the lofty investor expectations.
At 644p, Trafficmaster's shares stand on a multiple of around 130 times profits expected for 2001. Although there was a "no comment" on the rather rich rating, McIntosh neatly summed up the ongoing valuation dilemma for investors:
"Several financial institutions have all done their own views on the global marketplace and all of them are saying that there is a big marketplace there and Trafficmaster is well positioned to be successful in that. If you believe the market projections, if you believe how these analysts view our position, then Trafficmaster is cheap. If you look at it in terms of today's fundamentals, we're expensive. People have to take their own view."
