CON-SPACE Discusses Success in United Kingdom and Europe
Richmond, British Columbia, March 10, 2004 CON-SPACE Communications Ltd. (CCB – TSX Venture) (http://www.con-space.com), Chairman, Mr. James L. Swanson, announced today that in a recent interview Vice President of UK & European Operations, Andy Ibbetson, provided investors with detailed information regarding the company’s current success and future strategy for growth within the United Kingdom and Europe.
The interview was conducted by AGORA Investor Relations and is the third in a series of interviews in which management is given the opportunity to discuss operations “beyond the press release”. The purpose of these interviews is to provide CON-SPACE investors and the investment community as a whole with a deeper insight into company operations. Investors will also have the ability to participate in future interviews by submitting questions for response.
Following is the interview:
AGORA: Hello, Andy. On behalf of all CON-SPACE investors, we would like to thank you for taking the time to provide investors with an even deeper understanding of your role with respect to United Kingdom & European Operations and the basis for the Company’s success in these regions.
ANDY IBBETSON: Thanks for asking me actually there has been so much going on lately that its great to have the opportunity to step back from the day in, day out, and tell people whats really going on in our company.
AGORA: Before we get into detail of CON-SPACE success overseas, tell us a little bit about your role in the company and its UK/European operations
ANDY IBBETSON: Where do I startI am one of the CON-SPACE originals. While the papers list Terry and Jim as the companys founders, I always considered myself as a founding member of the team. I have been here since the beginning and I am generally regarded as the companys fixer. I have been involved in every department within our company at one time or another and was responsible for a major re structuring a few years ago. In my free time… I was responsible for building our presence in the Rescue market and from there I took over building the OEM (private label) side of the business. Now I am located in the U.K. with the task of integrating the office here with the overall company structure and building a strong presence within the European market.
AGORA: Now, correct us if we are wrong but despite the fact the UK is within Europe, CON-SPACE has divided them into two distinct operating regions. Is that due solely to the fact there are no language barriers in the UK as there are in the rest of Europe?
ANDY IBBETSON: No, nolet me correct you we dont divide Europe & U.K they do that themselves. By that I mean, for us internally the only separation is in the books as U.K is dealing in Pounds Sterling and virtually all the rest of Europe in Euros. My goal is to have the U.K. operation become the hub for all CON-SPACE business in Europe. While I recognize there are differences between European countries many of these are being regulated away by EU Directives and harmonized regulations. Our position has been strengthened by the certification of our products under the European “ATEX” Directive 94/9/EC. In plain terms this is a directive that regulates Intrinsic Safe (explosion proof) electronic equipment for all the EU nations. It is a major process to go through and as far as I know there are very few other companies in Europe that have an ATEX approved radio accessory.
AGORA: Let’s discuss the great success you’ve had in the UK to date. Specifically, on January 27, 2004, you announced an order from the UK Fire Inspectorate totaling just under $1,000,000 – though this wasn’t your first major win over there. What other major wins have you had and what has been the basis for each of those successes?
ANDY IBBETSON: To me all of our orders at this stage of our development are major wins! You have to understand that this market is in the early stages of its development (compared to North America) and any user that sees the benefit of our equipment offering and seizes the opportunity is a pioneer. Our success is coming on word of mouth when people realize the safety, efficiency and productivity benefits our equipment provides. I have seen many parallels to our North American success since I moved to the U.K. and the trend is definitely upward. But to answer your question more directly we have had a number of major milestones since our arrival in the European Market. Some of our more high profile customers have been the UK Ministry of Defense, British Customs, BNFL British Nuclear Fuels Ltd., Atomic Weapons Establishment, Royal Navy, British Airways, Airbus Many other customers have bought smaller amounts of equipment but I think they better illustrate the trend of our expansion into Europe Naples (Italy) Fire Brigade, Norwegian Army, Bornack Confined Space Training (Germany), Shearing Plough (Ireland), Swiss Air (Switzerland) to name a few.
AGORA: Does the CON-SPACE track record of high-profile sales now establish the Company as a major player in the UK, or is there still work to be done with respect to market positioning?
ANDY IBBETSON: I will not pretend that the high profile orders havent helped but I still think we are just scratching the surface. The strategy we are currently implementing to grow European Business is well founded and achievable however we would like to speed up the process but that would require an influx of funds or a partnership with a likeminded organization. We receive inquiries almost daily from countries all over the globe regarding our equipment. Even with limited international marketing funds we continue to push outward as people talk about our equipment and our continued marketing efforts get our message into the right hands.
AGORA: It is no secret the UK takes homeland security very seriously and did so even before 9/11 due to conflicts with Northern Ireland. However, does this represent the biggest opportunity in the UK, or do rescue teams and normal industry demand make up a large part of demand?
ANDY IBBETSON: You are right, the U.K. does take homeland security very seriously and has embarked on a program called the New Dimension program implemented by the Office of the Deputy Prime Minister to address this issue. This will affect every corner of the U.K. and put them in a position to deal with any type of disaster or terrorist act. This represents a very large opportunity for us to help provide communication solutions in the Emergency Rescue Services. That said, there are many industrial & industrial rescue opportunities, which are reaching a point of maturity where they are finally starting to recognize that our type of equipment can provide real benefit. What we saw in the North American confined space market in approximately 1996 is roughly where we are now. We are at the thin end of the wedge in the Industrial market here in the UK and Europe.
Additionally, we are experiencing a significant amount of interest in our ATEX approved SR65i Radio accessory and are working with system suppliers to adapt a unit to their TETRA/AIRWAVE networked radios.
AGORA: How big of a market does the UK represent on an annual basis when taking into account demand from national security, rescue teams and general industry? More importantly, how are you allocating resources to best capture market share in each of those segments?
ANDY IBBETSON: This is a difficult question because there are so many areas within the UK Market that we are just finding out about and beginning to address. This is an extremely exciting market and one that is hard to pin down, as so many opportunities exist. Sales in the UK have steadily risen since we began here and the demand for our equipment is increasing. As we get better known and customers begin to see the variety of uses for our products I see no reason why this growth will not continue. As for resource allocation I think the fact that I relocated here is probably one of the biggest indicators as to how serious we are about the UK
and Europe. Additionally we are planning an expansion of our internal sales force in the UK to better support our growing distribution network and support our growth.
AGORA: Let’s talk about the remaining European market. How big is this market and have you been able to make progress?
ANDY IBBETSON: The European market is roughly the same size as the U.S. market, which is estimated to exceed a one billion dollar potential, when you look at the demographics however it must be noted that the size of the EU Market is increasing. This year, for example, 10 new countries are entering the European Union making it even larger. Future expansion of the EU is also in the works. While the US Market stays relatively constant this market is growing in leaps and bounds. I recognize that the full integration of these countries into the Union will take time but the writing is on the wall. The bottom line is this if you want to be a player in this market you have to have a European presence. We have made progress in continental Europe but our focus in the past has been directed more toward the UK market. We are now actively seeking partnerships with European distributors and building upon our success in the UK.
AGORA: Does the fragmented nature of Europe, in terms of language, culture and development, make sales and marketing that much more difficult? Country?
ANDY IBBETSON: In my opinion the fundamental mistake many North American based companies make in addressing the European market (and vice versa) is this they think that because a product sells in the North America it should sell in Europe and what is good enough for us is good enough for them. To me this approach is flawed: It is imperative we recognize that even though we might speak the same language there are many cultural, historical, ideological, and regulatory differences that have to be dealt with before we can properly meet the needs of European customers. It is only by doing our homework and speaking to people on the ground that we can build the bridges we need to succeed in Europe. It is exactly for this the reason that I moved to the U.K., so that CON-SPACE could gain the knowledge we need to succeed here and integrate it into our corporate culture.
Part of my job is to seek out the right distributors, train the heck out of them so they can service their customers properly and help to educate and develop the market. I equate it to something like this have you ever seen a guy spinning a basketball on his index finger? It takes some work to get it going, but once it is spinning you only have to hit it once in awhile to keep it going. Its the same with good distributors If you spend the time to educate them properly, build a rapport and show them shortcuts to achieve success they will keep succeeding on their own. Then keep the ball spinning with a multi layered system of distributor support i.e. readily available technical & sales back up (available almost around the clock with offices in the UK and Canada) as well as on-line tools, marketing information etc and occasional visits.
AGORA: Teaming with sales agents in each country would allow CON-SPACE to more rapidly deploy a sales force at considerably less cost than building out a separate infrastructure in each country. The disadvantage is a lower level of attention and customer service. Do the benefits of an agency agreement outweigh the costs and delay of doing it yourself?
ANDY IBBETSON: In short, yes but we have to look at it in context
To address this market properly we have to establish a strong network of distributors that understand the local customs, local safety regulations, know the players involved and can speak to them in their own language and on their own terms. There is immense value in a strong Distributor / Manufacturer partnership particularly in countries where you are essentially a visitor. Additionally, I am actively looking to broaden our OEM partnerships to include more European organizations. I believe this two-pronged cooperative approach will help us to cover the European market more effectively than we could do on our own.
AGORA: Regulatory bodies such as OSHA (Occupational Health and Safety Administration in the United States) and HSE (Health & Safety Executive in the UK) set strict standards for the workplace and insure CON-SPACE and like products are used to protect the safety of workers. That helps in creating demand for your products. Does the European Union have one such governing body, or does each country still have its own regulating bodies? In either case, are they as strict as OSHA and HSE in forcing employers to utilize confined space communications?
ANDY IBBETSON: At the moment each country has its own separate body that looks after Health and Safety Regulations and their enforcement. I dont see that changing in the near future. However many of the regulations are being standardized in the overall move towards regulation harmonization across the EU. This will be a lengthy process but it is happening. For instance, working at height regulations are being implemented this year. The trend will be to work toward more of these harmonized regulations. I have had a number of discussions with safety professionals on the topic of enforcement across Europe and I believe these organizations suffer from the same lack of resources that OSHA and the HSE do. That said, they are very serious about the safety of workers. I think European organizations recognize the value of the safety dividend and are very proactive about safety.
You are right when you say the regulations help create demand but even in the U.S. the regulations leave room for the user to choose to use our equipment or not. What really sells our equipment is the productivity and efficiency gains the people who use it experience when they get it. We are working on getting more equipment into safety training organizations so prospective users can actually get their hands on the equipment and see what a big difference it makes.
AGORA: Where do you see the biggest demand coming from the remainder of Europe? National security, rescue, industry – or a combination of each?
ANDY IBBETSON: Things like this have a way of finding their own level. If you are big in one market there is a spill over that occurs to other markets either directly or indirectly related. Initially, I think the European market will grow and build on the successes and the reputation for reliable equipment we have achieved in areas of Urban Search and Rescue, Military EOD (Explosive Ordinance Disposal) work and WMD (Weapons of Mass Destruction) response. The industrial safety market will take a little longer but there is no doubt in my mind that it will take off and meet or exceed the rescue market.
So to answer your question a combination of each sounds about right.
AGORA: Ultimately, for the UK and European regions, where do you see CON-SPACE in terms of market presence and penetration in 5 years?
ANDY IBBETSON: I think in the next 5 years we will be well entrenched and recognized as a serious player in the European Communication & Safety Markets. We are in the early stages of some projects that have the potential to propel us very rapidly into a period of expansion that could result in the establishment of a manufacturing facility in Europe.
At present we build products on a private label basis for a few European organizations but these partnerships were established from Canada. Now that I am based here, I intend to focus efforts on building this area of our European OEM business. From where I sit, we have nowhere to go but up! CON-SPACE is here to stay!
AGORA: Andy, on behalf of Agora and all CON-SPACE investors, we would like to thank-you for taking the time to conduct this interview and wish you continued great success.
ANDY IBBETSON: You are very welcome. I hope this gives people a better idea of the bigger CON-SPACE picture and what is going on within our company. If I may I would like to address my final comment to the Investors tha
t have followed us and been loyal to us over the yearsthey know that the successes we have achieved and will continue to achieve are based on real planning, real goals and real effort. They recognize that we are a group that is not satisfied with the status quo and are always striving to build new business and improve old ones. Thank you for your continued support or as we say in England Cheers!
AGORA: This concludes the third interview in our series of interviews with CON-SPACE key personnel. We invite all investors to provide their comments, questions and feedback on the CON-SPACE Investor Communication and Contact Forum at http://www.agoracom.com or e-mail us at: CCB@agoracom.com
This press release is available on the Company’s on-line Investor Relations site for investor commentary, feedback and questions. Investors are invited to visit http://www.agoracom.com and select the CON-SPACE Information and Contact Forum, or link directly to it at http://www.agoracom.com/nonmemforum/main.asp?topic=Con%2DSpace+Communications&tr
Investors are also invited to e-mail any questions regarding the Company directly to CCB@Agoracom.com Investors can also use this address to request being added to the CON-SPACE investor e-mail list.
About CON-SPACE Communications Ltd. http://www.con-space.com
CON-SPACE is recognized worldwide as the leading designer and manufacturer of specialized voice communication equipment used by Police, Fire, Rescue, Government Agencies, Militaries, Municipalities and general industry. The Company has distribution throughout North America, Great Britain, Australia, and parts of Asia, South America, and Europe. The Company also supplies many other manufacturers with Private Labeled products.