Good Morning,

Today, I intend to cover:

Cheers,

Graham



Tracsis (LON:TRCS)

Share price: 402.5p (-13%)
No. shares: 27.8m
Market cap: £112m

Trading Update

This is a profit warning that's not a profit warning - an announcement that there might be a profit miss, depending on H2, after a tricky H1.

But the market's reaction tells us that plenty of investors think that the risk of a H2 miss is now pretty big!

Overview:

Group revenues for the six months to 31 January 2017 were c. £15.5m (2016: £13.1m*), and EBITDA is expected to be slightly ahead of the previous period (2016: £3.2m*) as is Adjusted Pre Tax Profit (2016: £2.9m*).

Rail Tech & Services

The key warning is as follows:

Due to longer sales cycles associated with higher value products combined with changes in the Department for Transport's franchise bid timetable, some sales anticipated to take place in H1 are now expected to take place in H2 which is supported by our current pipeline.

Traffic & Data Services

We are reminded that the SEP business is busiest in the summer months, and also:

...the Traffic & Data Services division is trading well albeit within competitive market conditions, which has led to increased price competition and associated gross margin pressure.

I always applaud companies which admit that competition is tough, but of course the question of competitive advantage is critical to the investment case.

The Traffic & Data Services Division (follow link) operates in the following sectors: Traffic Survey, Passenger Surveys, Data Capture and Event Traffic Management.

The technologies involved there are Bluetooth Sensors, Number Plate Recognition, Anonymised Mobile Network Data and Automatic Traffic Counting.

Given the steady rate at which these technologies are improving, it must be tricky to stay one step ahead of the competition - not impossible, but requiring constant innovation.

Summary

H2 "is expected to be significantly stronger" than H1.

And here is the confirmation that it's just a semi-profit warning:

The outcome for the full year remains subject to the timely conversion of new sales for our various software products and services, supported by the improvement in…

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