Europe News: Telematics turns a profit at last

Europe News:  Telematics turns a profit at last

After a decade of trials and tribulations, the leading players in the European telematics industry report good profitability.

Two good examples among publicly traded companies are Belgium-based Transics and Italy-based Cobra Automotive Technologies.

Transics achieved 72% revenue growth in 2007 and posted a net profit of €13.2 million for its first year as a publicly traded company.

Cobra posted an almost equal profit, with the telematics business accounting for close to one third. A lot can be learned from how these companies are doing their business.

Transics is the star performer in the European telematics sector with a clear focus on high-end fleet management solutions for the transport and logistics sector. Between 2005 when the Carlyle Group acquired the majority of the company and 2007 when it was listed on the Euronext Stock Exchange, revenues grew by 134% to €43.5 million.

During 2007, the company shipped 13,700 on-board computers to customers across Western and Central Europe.

Transics also broadened its service offering through the acquisition of DIS, a French supplier of IT solutions for tacho-based driving time registration.

The successful geographical expansion and the extension of the product portfolio are two important success factors for Transics. But arguably it also helps that the European truck market is booming, driven by rapidly increasing demand for road transports.

Cobra Automotive Technologies is one of the most profitable players in the consumer telematics sector. The company's traditional core business is electronics systems for the automotive OEM and aftermarket segments, which still accounts for the greater part of revenues.

Location based services – primarily stolen vehicle tracking – however, now accounts for 24% of the total turnover and an even larger share of its profits.

At the end of 2007, Cobra reported achieved 136,000 active subscribers, a 168% increase over the previous year. Organic growth generated 60,000 new subscribers, with the remainder being acquired through acquisitions of Navtrak in the UK and local distributors in Italy and France. Cobra now ranks as one of the leading SVT providers in each of these countries and also has a substantial subscriber base in Russia where it is represented by licensees.

What Transics and Cobra are doing today has, of course, been tried before in the history of European telematics, sometimes with disastrous financial results.

The fact that their strategies can be implemented today reflects that the market is more mature and that potential customers have a better understanding of the benefits of telematics.

Financial profitability should be seen as the final proof that, after going through a volatile initial period of hype and despair, the European telematics industry has entered a more balanced growth phase.

Author: TobiasRyberg, Senior Analyst, Berg Insight

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