Good morning! 

Today we have:

Tracsis (LON:TRCS)

  • Share price: 723p (unch.)
  • No. of shares: 28 million
  • Market cap: £205 million

Before we get into today's news, I'd like to mention that John McArthur (CEO of Tracsis (LON:TRCS) ) joined us in the comments thread for yesterday's report.

I had said that I wouldn't pay its high valuation multiple for any company in its sector, and Mr McArthur asked me to explain.

The simple answer is that I viewed Tracsis as a transportation consultancy, software and hardware business, on the basis of what it says on its own website, and having browsed the websites for its various services.

Speaking to Leo in the comments, Mr McArthur writes:

"We are not a 'software consultancy' business but simply a technology business in its purest sense i.e. we are first and foremost a software company that develops and licenses over a dozen software products which we own all the IP for. We were originally a spin out from the University of Leeds School of Computing and employ over 100 full time professional software developers who generally have very strong maths/physics or engineering backgrounds. Latterly we have also developed our own hardware and now also do a variety of data capture work using all sorts of novel technologies.

I understand the point you are trying to make about consultancy businesses and 'people businesses' but this simply isn't the case with Tracsis. The vast majority of our profit is derived from long term, software licensing contracts with blue chip customers and less than 10% of our income is consultancy. The consultancy we do undertake is highly specialised and is generally derived from doing bespoke projects by using our own products which will be similar to all software companies."

It's always helpful to hear things from management's point of view, so thank you very much John for putting this across!

Within reason,…

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