REG - Tracsis PLC - Final Results
10/11/2021 07:05
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20211110:nRSJ8697Ra&default-theme=true
RNS Number : 8697R Tracsis PLC 10 November 2021
Tracsis plc
('Tracsis', 'the Company' or 'the Group')
Audited results for the year ended 31 July 2021
Tracsis, a leading provider of software, hardware, data analytics/GIS and
services for the rail, traffic data and wider transport industries, is pleased
to announce its audited final results for the year ended 31 July 2021.
Financial Highlights:
· Strong financial performance with a return to growth in revenue
and increased profit despite continued Covid-19 challenges
· Revenue increased to £50.2m (2020: £48.0m) with growth in the
higher margin Rail Technology & Services Division and in Data
Analytics/GIS only partially offset by lower sales in our Events and Traffic
Data businesses as expected due to ongoing Covid-19 restrictions on their end
markets
o Revenue growth of 12.7% in Rail Technology & Services Division
o Revenue decrease of only 3.0% in Data, Analytics, Consultancy & Events
Division which was impacted by Covid-19
· Adjusted EBITDA* of £13.0m (2020: £10.5m) reflects growth in
software revenue and the positive impact of cost reduction actions taken in
response to the pandemic
· PBT increased to £4.6m (2020: £4.1m)
· Cash balance of £25.4m (31 July 2020: £17.9m) with no Covid
deferrals due to be paid
· The Board is not declaring a final dividend but expects to
restore the progressive dividend policy for the year to 31 July 2022
Operational Highlights:
· Large, multi-year RailHub enterprise software contract win in the
UK which will double user base to over 30,000 individuals
· Continued to implement a number of large multi-year TRACS
Enterprise rail contracts won in previous years
· Continued growth of pipeline of other multi-year rail contract
opportunities
· Well positioned to benefit from the strategic direction outlined
for the UK Rail Industry in the Williams-Shapps plan for Rail
· Strengthened the Group's transport insights offering through the
acquisition of Flash Forward Consulting Ltd
· Continued investment in Group integration, management capability,
processes and systems including launch of new groupwide branding and securing
ISO27001 certification across all our rail businesses
Post year end Highlights:
· Rebound of activity levels in Events and Traffic Data with both
markets expected to recover to full activity levels through the course of the
coming year
· Acquisition of Icon Group to enhance the Group's Data
Analytics/GIS capabilities
· Secured another smart ticketing contract award in the UK
· Q1 trading in line with Board's expectations and well positioned
to deliver further growth in the coming financial year and beyond
* Earnings before finance income & expense, tax, depreciation,
amortisation, exceptional items, other operating income, share-based payment
charges and share of result of equity accounted investees. See note 6 for
reconciliation.
Chris Barnes, Chief Executive Officer, commented:
"I am pleased with our strong performance this year in the face of continued
Covid-19 challenges. This reflects the great job our teams have done in
steering the business through the pandemic. My highest priorities were to look
after the wellbeing of all our employees and to protect as many jobs as
possible, and I am really pleased that all parts of the Group are now busy as
the Covid restrictions on our end markets have been lifted.
We have a record pipeline of large multi-year opportunities across all
business units, and we are continuing to implement a number of large contracts
won in previous years. We completed delivery of a large RailHub enterprise
software contract at the end of the year, which is a significant achievement
for our safety and risk management software business and creates a strong
foundation for future growth. The publication of the Williams-Shapps plan for
Rail has established the strategic direction of the UK Rail Industry, and
Tracsis is well positioned to help deliver this vision. We have a number of
TRACS Enterprise contracts which will go-live in early 2022.
In the Data, Analytics, Consultancy and Events Division we continue to see
high activity levels in the Data Analytics/GIS market. The recent acquisition
of Icon Group further expands our capabilities and offering in this growing
market. Our consultancy business has been strengthened following the
acquisition of Flash Forward Consulting in February 2021. This has now been
fully integrated and we are seeing a growing pipeline of opportunities as a
result. Activity levels in the Events and Traffic Data business that were
hardest hit by the pandemic have started to rebound strongly. Provided that we
do not return to lockdown restrictions, we expect both markets to recover to
full activity levels through the course of the coming year.
We are confident that there are strong growth prospects for all parts of the
Group and therefore remain committed to implementing our overall strategic
growth and investment plans. We will continue to pursue organic and
acquisitive growth supported by a strong balance sheet"
Presentations and Overview video
Tracsis is hosting an investor webinar on Friday 12 November, at 13:30 hrs
GMT. If you would like to attend please register here:
https://bit.ly/Tracsis_FY_webinar_r (https://bit.ly/Tracsis_FY_webinar_r)
A video overview of the results from the CEO, Chris Barnes, and CFO, Andy
Kelly, is available to watch here: https://bit.ly/TRCS_FY21_overview
(https://bit.ly/TRCS_FY21_overview)
Enquiries:
Tracsis
plc
Tel: 0845 125 9162
Chris Barnes, CEO
Andy Kelly, CFO
finnCap
Ltd
Tel: 020 7220 0500
Christopher Raggett, Charlie Beeson, Corporate Finance
Andrew Burdis, Sunila da Silva Corporate Broking
Alma
PR
Tel: 020 3405 0205
David Ison/Hilary Buchanan/Joe Pederzolli
tracsis@almapr.co.uk
Chairman & Chief Executive Officer's Report
Introduction
The Group has performed well during the year ended 31 July 2021, delivering
growth in revenue and adjusted EBITDA*, and making further progress in
executing its strategy, despite ongoing Covid-19 driven revenue challenges.
Activity levels in the Rail Technology and Services Division remain high and
this part of the Group has demonstrated the resilience of its business model
in supporting the operational requirements of running and maintaining the
railway. The Division has won some key contracts during the year, and there
has been good progress in delivering large multi-year contracts won in
previous years. Our focus on these projects is to work closely with our
customers as a partner to deliver significant value over the long-term.
Delivery timelines here are determined in partnership with our customers.
The release of the Williams-Shapps Plan for Rail in May 2021 has provided
clarity on the strategic direction of the UK rail industry, with a greater
focus on passenger and freight customers, the delivery of an increasingly safe
and reliable rail network, and greater integration across different transport
modes whilst prioritising innovation in new technologies. The Directors
believe that Tracsis is well positioned to help deliver this strategic vision.
With the rail industry focused on improving safety, improving timetabling and
on-time train performance, increasing pre-emptive and asset-condition
maintenance, and accelerating innovation in areas like pay-as-you-go smart
ticketing and delay repay, the Group is well positioned to benefit from the
commitment to greater innovation and investment in a digital railway.
Our pipeline across the Rail Technology and Services Division is at record
levels, and the diversification of our revenue streams provides some
mitigation against any potential short-term volatility as the industry
transitions to a new Great British Railways-led operating model.
As anticipated, there were continued Covid-related challenges in the Events
and Traffic Data businesses. Cost reduction actions taken in summer 2020 in
response to these challenges were delivered in line with expectations. By
taking these actions, we were able to protect jobs and both businesses were
able to respond quickly when activity levels in their end markets increased as
Covid restrictions were eased. We anticipate a continued recovery in these
markets through the coming year. There was further growth in Data
Analytics/GIS during the year, and our Transport Insights offering has been
significantly enhanced with the acquisition of Flash Forward Consulting in
February 2021 and the subsequent consolidation of our rail consultancy and
passenger analytics businesses into Tracsis Transport Consultancy.
The Group has made good progress in implementing a more integrated business
model and adopting common processes and systems. Key achievements in the year
include securing ISO27001 certification across all our rail businesses,
rolling out new Group-wide branding, launching the Innovation Hub to drive
'next generation' R&D and implementing a shared services model across core
support functions.
The Board would like to recognise the outstanding contribution that Tracsis'
people have made during the year, especially during the unprecedented Covid
pandemic. Our highest priorities through this period were to safeguard our
employee's health and welfare and to protect as many jobs as possible. The
response of our teams to these unique challenges was outstanding and it is
pleasing to see high activity levels across all parts of the Group.
Financial Summary
Group revenues of £50.2m (2020: £48.0m) were £2.2m (4.7%) higher than prior
year. Revenues in the Rail Technology and Services segment grew by £3.0m
(12.7%), with the impact of Covid-19 limited only to reduced delay repay
transaction revenues which were a direct result of lower passenger numbers. In
the Data, Analytics, Consultancy and Events segment revenue was £0.7m (3.0%)
lower than prior year as a result of the continued impact of Covid-19
restrictions on end markets in our Events and Traffic Data businesses. The
adverse year-on-year revenue performance across the Events, Traffic Data and
Delay Repay businesses was £2.1m (12.3%). Across the rest of the Group, there
was organic revenue growth of £2.4m (7.7%) after adjusting for a net £1.9m
year-on-year benefit from acquisitions.
Adjusted EBITDA* of £13.0m was £2.5m (24.0%) higher than prior year (2020:
£10.5m). This includes increased revenue from software and the positive
impact of cost reduction actions taken in response to the pandemic, which
delivered a benefit to EBITDA versus the comparative period of £1.8m. In
addition, the Group has claimed through the Coronavirus Job Retention Scheme
("CJRS") in respect of furloughed staff in the year, with support to the
income statement of £0.9m (2020: £0.7m(1)).
Statutory profit before tax of £4.6m is £0.5m higher than prior year (2020:
£4.1m). In addition to the increase in adjusted EBITDA* described above, this
reflects the following items:
· £1.6m depreciation charge (2020: £1.9m) which includes a net
charge of £1.0m (2020: £1.0m) in relation to right of use assets in
accordance with IFRS accounting standards;
· £4.3m amortisation of intangible assets (2020: £3.6m)
reflecting a full year charge following the acquisition of iBlocks in March
2020 and the initial charge for the five month period following the
acquisition of Flash Forward Consulting in February 2021;
· £1.3m share-based payment charges (2020: £1.1m) which
principally relate to employee participation in the Group share option
schemes;
· £1.1m exceptional items (2020: £0.1m credit) reflecting £0.7m
unwinding of previously discounted contingent consideration balances in
accordance with IFRS accounting standards; a £0.3m net increase in the
assessed fair value of contingent consideration based on the future
expectations of performance from previous acquisitions; and £0.1m of
transaction costs associated with the acquisition of Flash Forward Consulting;
· £0.4m other operating income (2020: £0.4m) relating to a credit
in respect of research and development costs for Corporation Tax purposes;
· £0.1m net finance expense (2020: £nil) representing the
interest charge on lease liabilities in accordance with IFRS accounting
standards; and
· £0.4m charge (2020: £0.3m) relating to the share of the result
of equity accounted investees
The Group continues to have significant levels of cash and remains debt free.
At 31 July 2021, the Group's cash balances were £25.4m (2020: £17.9m). Cash
generation remains strong. The Group has paid all contingent consideration,
VAT, PAYE and Corporation Tax due in the period and has not taken advantage of
any Government support in respect of taxes.
* Earnings before finance income, tax, depreciation, amortisation, exceptional
items, other operating income, and share-based payment charges and share of
result of equity accounted investees - see note 6 for reconciliation.
(1) Total received under the CJRS for the year ending 31 July 2020 was £2.4m,
of which £1.7m was paid directly to casual labour leaving a balance of £0.7m
which represents the true support to the Income Statement regarding permanent
employees.
Trading Progress and Prospects
Rail Technology & Services
Summary segment results(1):
Revenue
£26.4m (2020: £23.4m)
Adjusted EBITDA* £9.1m (2020:
£8.6m)
Profit before Tax £8.3m
(2020: £8.1m)
The Division has delivered further revenue growth in the year and continues to
benefit from high levels of recurring software revenue, including that from
multi-year contract wins in previous years. Annual recurring and routinely
repeating revenue for the year to 31 July 2021 was approximately 70%.
Underlying organic revenue growth, after adjusting for the effect of
acquisitions and the impact of Covid-19 on delay repay revenue, was £2.4m
(10.9%).
We continue to see good growth in our Operations & Planning product
suites, where work continues on implementing our TRACS Enterprise product
suite with Train Operating Companies ("TOCs"). Our digital railway and
infrastructure businesses delivered record revenue in the year, and secured
notable contract wins for our remote condition monitoring and risk and safety
management products. The impact of Covid-19 in this Division was limited to
delay repay revenues, with fewer passengers travelling due to Government
restrictions. This was more than offset by the contribution from iBlocks,
acquired in March 2020, where the pipeline for its smart ticketing technology
is growing strongly.
Rail Operations & Planning
Total revenues from the Group's rail operations & planning software and
hosting offerings were £10.9m (2020: £10.5m). This takes account of the
various revenue streams from our TRACS, ATTUne, COMPASS, and Retail &
Operations product suites. Software sales continue to benefit from high
renewal rates from existing customers, and also from multi-year contract wins
from previous years which we are currently implementing for our clients. Work
continues on implementing our TRACS Enterprise product with TOCs which were
secured in previous years. Delivery timelines here are determined in
partnership with our customers, and we expect two major TOC's to go-live in
the early stages of 2022. An update on timing for a third TOC will be provided
in due course. We have a strong pipeline of new large multi-year TRACS
Enterprise opportunities in both the passenger and freight sectors of the
industry. Bellvedi continues to perform well, and the ATTUne product forms an
integral part of the overall TRACS Enterprise solution.
Digital Railway & Infrastructure
Total revenues across the Digital Railway and Infrastructure offerings
increased by 19% to a record £13.0m (2020: £11.0m). Our remote condition
monitoring business MPEC had a very strong year. It has continued to see
strong demand from our core UK client base and during the year was awarded new
contracts for the supply of remote condition monitoring hardware and software
to a major North American transit agency which will expand our installed base
in this market.
Our safety and risk management software business OnTrac also had a very strong
year. Activity here was dominated by design and development work on our
RailHub product suite as part of a funded enterprise licence project. The
completion of this work led to the award of a significant multi-year contract
in the UK that will double RailHub's user base to over 30,000 individuals.
This reflects the growing momentum in UK rail's shift to digital, and
underpins our confidence in the future of the RailHub platform with both rail
infrastructure providers and maintainers. The contract award delivered a
non-repeat high-margin licence contribution in the year to 31 July 2021, and
will deliver additional recurring annual software revenue in future years in
this part of the Group.
Both businesses have a good pipeline of large contract opportunities.
Customer Experience
Revenue of £2.5m increased by £0.5m versus prior year (2020: £2.0m). As
anticipated, the reduction in rail passenger numbers as a result of Covid-19
restrictions resulted in lower delay repay transaction revenues. This business
continues to operate from a modest cost base. The decrease in delay repay
revenue was more than offset by the revenue contribution from iBlocks that was
acquired in March 2020. We are seeing good levels of interest in iBlocks'
smart ticketing product offering, which is well aligned with future passenger
requirements as Covid-19 restrictions are lifted and with the UK Government's
strategic intent to deliver increased Pay As You Go (PAYG), multi-modal
ticketing as outlined in the Williams-Shapps Plan for Rail. Post year-end we
were awarded another contract to supply this technology in the UK.
Data, Analytics, Consultancy & Events
Summary segment results(1):
Revenue £23.8m
(2020: £24.6m)
Adjusted EBITDA* £3.9m (2020:
£1.8m)
Profit before Tax £3.0m (2020:
£0.5m)
As anticipated, Covid-19 restrictions had a significant impact on the end
markets of our Events and Traffic Data businesses in the year. In both cases,
demand for our products and services remains strong and we have seen activity
levels progressively recover as restrictions have been lifted. Our primary
objective throughout the Covid pandemic was to protect jobs and employee
wellbeing, as a result of which we have been well positioned to respond
quickly to this increase in demand. We anticipate further recovery in activity
levels in these markets through the year to 31 July 2022, supported by the
Government-backed insurance scheme for the live events sector.
The Data Analytics / GIS market continues to offer attractive opportunities
for growth and has been largely unaffected by Covid-19. We have a strong
pipeline of opportunities in this area and post year-end we enhanced our
product offering with the acquisition of Icon Group. Our Transport Insights
business continues to perform well and was strengthened in the year by the
acquisition of Flash Forward Consulting and the subsequent launch of a broader
Transport Consultancy offering.
Despite lower revenue, adjusted EBITDA* increased by £2.1m which includes the
£1.8m benefit from cost reduction actions taken in response to the pandemic.
Data Analytics/GIS
Revenue increased to £5.7m for the year (2020: £5.4m) with high activity
levels across Irish and UK customers. During the year the business went live
with an innovative new product that is now used by three water utilities to
manage the regulated use of biosolids in agriculture, and continued to develop
a range of innovative mobile apps and data analytics tools for other clients
across the rail, bus, environmental and utilities sectors. The business has a
strong pipeline of new opportunities. Post year-end, the acquisition of Icon
Group has further enhanced our product offering in this growing market by
adding earth observation capabilities. Icon Group will be integrated with
Tracsis' existing Data Analytics/GIS solutions provider Compass Informatics to
create an Irish-based Data Analytics centre of excellence specialising in
providing location-related technologies and analytics solutions to government
and commercial organisations. The combined Irish business will have c.130
staff and will work across a variety of sectors deriving most of its revenue
from regulated industries including transportation, asset management,
environmental and utilities.
Transport Insights
Revenue of £3.5m was broadly similar to the prior year (2020: £3.4m). The
Flash Forward Consulting business acquired at the end of February 2021 was
fully integrated during the second half of the year with the Group's existing
Rail Consultancy and Passenger Analytics businesses to create a consolidated
Tracsis Transport Consultancy business delivering an enhanced offering to
customers that covers all areas of the Group. This is already delivering a
growing pipeline of opportunities and expanding our reach outside of rail into
other transport industry sectors.
Rail Consultancy revenue increased versus the prior year, and there was
further incremental contribution from Flash Forward. This was offset by lower
activity in Passenger Analytics which was impacted by lower rail passenger
numbers.
Traffic Data
Revenue of £7.7m was £1.0m lower than the prior year (2020: £8.7m) due to
the impact of Covid-19 related restrictions, which resulted in work being
postponed or cancelled as the prevailing traffic conditions were not
representative of client needs. The main exception was the National Road
Traffic Census which continued and was a valuable source of revenue in the
year. Cost reduction measures were implemented in this part of the Group,
including utilising the CJRS to protect jobs. This has left the business well
placed to respond to increasing activity levels as Covid-related restrictions
have eased. We anticipate a full recovery in activity levels through the
coming financial year, although the timing of this remains uncertain.
Event Transport Planning & Management
Revenue of £6.9m was very close to the prior year (2020: £7.0m) despite
continued headwinds in the first half of the year from events being cancelled
or postponed due to the Covid pandemic. This reflects the business winning
additional work with new and existing customers, as well as a recovery in
underlying activity levels in the final months of the financial year as Covid
restrictions were lifted. New work secured included contracts to support Covid
test and vaccination centres which delivered £1.3m revenue in the year.
Similar to the Traffic Data business, the CJRS scheme enabled us to both
protect jobs and to respond quickly to the rapid increase in demand towards
the end of the year. The demand for sporting events and music festivals
remains strong and we anticipate a full recovery in activity levels through
the coming financial year.
(1) Comparative information for 2020 has been updated to reflect the change
in segmental analysis detailed further in note 3b.
Acquisitions
The Group acquired Flash Forward Consulting ("FFC") on 26 February 2021, which
has enabled it to consolidate and expand its Transport Insights offering.
Established in 2012, FFC is a London-based consultancy business that operates
predominantly across the rail and bus sectors. It has a well-established
senior level network across the transport owning groups, local and central
transport governing authorities and Network Rail, and offers a range of
strategic and practical technical consultancy services. Alex Warner, FFC
founder, has joined the Group to lead our consolidated consultancy business
which combines FFC with our existing Rail Consultancy and Passenger Analytics
offerings. The consolidated business delivers an expanded offering to
customers across the transport industries and offers consultancy services that
cover all areas of the Group.
The acquisition consideration comprised an initial cash payment of £1.1m to
reflect the net current asset position of the business which was funded out of
Tracsis cash reserves and the issue of shares in Tracsis to a value of
£0.1m. Deferred consideration totalling £0.9m is payable in three equal
instalments on the first, second and third anniversary of the acquisition.
Additionally the sellers were allotted 10,225 "A" shares in Tracsis Rail
Consultancy Limited which have an assessed fair value of £0.6m at the
acquisition date. The "A" shares have full dividend and capital distribution
rights attached but do not have any voting rights attached to them. "A" shares
guarantee the holder a dividend each financial year. The Group holds a call
option to re-purchase the full amount of "A" shares for a pre-determined
multiple of Profit Before Tax from two years after the acquisition date.
Post year end the Group acquired Icon Group ("Icon") on 3 November 2021.
Headquartered in Dublin, Icon is an interdisciplinary geoscience business who
specialise in earth observation (EO), Geographical Information Systems (GIS)
and spatial data analytics. Icon Group has several long-term repeat contracts
and employs around 60 full-time staff, all of whom will remain with the
business post transaction.
Icon Group will be integrated with Tracsis' existing Data Analytics/GIS
solutions provider Compass Informatics to create an Irish-based Data Analytics
centre of excellence specialising in providing location-related technologies
and analytics solutions and services to government and commercial
organisations. The acquisition of Icon adds EO capabilities that enhance the
Group's offering in this growing market, and has a customer base that is
complementary to Tracsis'. The combined business will have c.130 staff and
will work across a variety of sectors deriving most of its revenue from
regulated industries including transportation, asset management, environmental
and utilities.
The acquisition consideration comprises an initial cash payment of £1.9m
which was funded out of Tracsis cash reserves and the issue of 68,762 new
ordinary shares in Tracsis to a value of £0.6m. An additional payment of
approximately £1.7m will be made on a euro for euro basis to reflect the net
current asset position of the business (above a working capital hurdle) at
completion and will be finalised in due course. Additional contingent
consideration of up to £1.5m is payable subject to Icon Group achieving
certain stretched financial targets in the three years post acquisition.
People
The Group is thankful to the whole team for their hard work during the year,
especially during the unprecedented Covid pandemic. Our priorities throughout
this period have been to safeguard the health, welfare and safety of our
people, and to protect as many jobs as possible. The response of our teams has
been outstanding. We largely moved to remote homeworking across the Group,
whilst ensuring that our product and service offerings have continued. As
Covid restrictions have eased, we have re-opened all of our offices with safe
working practices in place and we are transitioning to a hybrid working model
with most employees spending some time in the office and some time working
from home.
The Board believes that the long-term success of the Company depends on the
engagement and commitment of its employees. We consider our employees to be
some of the best in the sector, and we strive to provide them with
opportunities for personal development, career progression, and a safe and
inclusive working culture. The Group hired a Director of People in July 2021.
This role is part of the senior leadership team and will ensure we have the
processes, learning & development frameworks, and robust succession plans
in place to continue to offer a compelling proposition to current and future
employees, and to ensure we have the capabilities and talent to deliver our
growth strategy.
Operations
The Group has made progress in implementing a more closely integrated
operating model, as we continue to implement best practice across the Group
and to lay the foundations to deliver further growth. A shared services
structure has been adopted in core support functions including health &
safety, HR, bid management, finance, IT security, risk management and quality.
New Group-wide branding was implemented in the second half of the year,
ensuring that all parts of the Group share a consistent brand identity. This
will broaden the awareness of the Group's breadth of products and services,
whilst enhancing collaboration across the business. ISO27001 certification has
been secured for all Rail Technology & Services businesses.
Dividends
As detailed above, certain of the Group's businesses were adversely impacted
by the Covid-19 pandemic. In order to protect jobs in the Group that would
otherwise have been at risk, the Group utilised the Coronavirus Job Retention
Scheme ("CJRS") in respect of furloughed staff in the year. In this context,
the Board does not consider it appropriate to pay a final dividend this year.
The Board expects to restore the progressive dividend policy for the year
ending 31 July 2022.
Board
On 1 February 2021 Andy Kelly was appointed Chief Financial Officer, replacing
Max Cawthra. The Board would like to thank Max for his significant
contribution to Tracsis over the past decade. Mac Andrade resigned from the
Board on 31 July 2021 to focus on other interests and the Board would like to
thank Mac for his contribution to our success. Post year-end Dr James Routh
was appointed to the Board as a Non-Executive Director and Senior Independent
Director on 29 September 2021.
Summary and Outlook
Our end market drivers are strong, and Tracsis' products and services are well
aligned with these drivers as they enable our customers to deliver
mission-critical activities with increased efficiency, enhanced performance,
higher productivity, and improved safety.
The Group has a clear growth strategy and has a strong balance sheet to
support its delivery. We continue to implement a number of large multi year
enterprise software contracts and have a record pipeline of future
opportunities. Whilst the timing of these remains difficult to predict, the
Directors believe they establish a strong foundation for future growth. In
addition to delivering organic growth, M&A remains a core part of our
strategy. We also recognise the need to continue to enhance integration and
collaboration across our businesses, increase senior management bandwidth and
talent, and improve our systems and processes as we prepare for scalable
growth. We have made good progress in the year and will continue to invest in
this area.
Q1 trading has been in line with the Board's expectations, and we have seen
further recovery in activity levels in those parts of the Group that have been
previously impacted by Covid-19. We believe that activity levels will
progressively return to normal through the rest of the financial year,
although the timing of this remains uncertain.
The Board believes that the Group is well positioned to deliver further growth
in the coming financial year and beyond.
Chris Cole,
Chairman
Chris Barnes, Chief Executive Officer
9 November 2021
Consolidated Statement of Comprehensive Income for the year ended 31 July 2021
2021 2020
Group excluding in-year acquisitions
Acquisitions in-year Total Total
Note £000 £000 £000 £000
Revenue 3 49,825 412 50,237 47,998
Cost of sales (15,157) (267) (15,424) (16,796)
Gross profit 34,668 145 34,813 31.202
Administrative costs (29,390) (267) (29,657) (26,779)
Adjusted EBITDA* 3,6 12,941 37 12,978 10,463
Depreciation (1,602) (1) (1,603) (1,882)
Adjusted profit ** 6 11,339 36 11,375 8,581
Amortisation of intangible assets (4,240) (29) (4,269) (3,599)
Other operating income 440 - 440 376
Share-based payment charges (1,276) - (1,276) (1,050)
Operating profit before exceptional items 6,263 7 6,270 4,308
Exceptional items: 9
Impairment losses - - - (1,155)
Other (985) (129) (1,114) 1,270
Operating profit 5,278 (122) 5,156 4,423
Finance income 11 - 11 76
Finance expense (98) - (98) (79)
Share of result of equity accounted investees (434) - (434) (309)
Profit before tax 3 4,757 (122) 4,635 4,111
Taxation (2,258) (21) (2,279) (1,234)
Profit after tax 2,499 (143) 2,356 2,877
Other comprehensive income/(expense)
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation differences (126) - (126) 21
Total comprehensive income/(expense) for the year 2,373 (143) 2,230 2,898
Earnings per ordinary share
Basic 4 8.06p 9.95p
Diluted 4 7.82p 9.67p
Consolidated Balance Sheet as at 31 July 2021
2021 2020
Note £000 £000
Non-current assets
Property, plant and equipment 3,540 3,581
Intangible assets 51,745 54,376
Investments - equity 50 50
Investments in equity accounted investees 605 1,039
Deferred tax assets 551 877
56,491 59,923
Current assets
Inventories 381 430
Trade and other receivables 11,263 6,382
Cash and cash equivalents 25,387 17,920
37,031 24,732
Total assets 93,522 84,655
Non-current liabilities
Lease Liabilities 1,131 986
Contingent consideration payable 8 3,220 5,587
Deferred consideration payable 8 584 -
Deferred tax liabilities 8,517 8,234
13,452 14,807
Current liabilities
Lease liabilities 928 1,128
Trade and other payables 17,007 13,509
Contingent consideration payable 8 4,689 1,747
Deferred consideration payable 8 308 -
Current tax liabilities 473 439
23,405 16,823
Total liabilities 36,857 31,630
Net assets 56,665 53,025
Equity attributable to equity holders of the company
Called up share capital 117 116
Share premium reserve 6,401 6,373
Merger reserve 5,525 5,420
Retained earnings 44,710 41,078
Translation reserve (88) 38
Total equity 56,665 53,025
Consolidated Statement of Changes in Equity
Share Capital Share Premium Merger reserve Retained Earnings Translation reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 August 2019 115 6,343 3,921 37,545 17 47,941
Adjustment on initial application of IFRS 16 (net of tax) - - - (106) - (106)
Profit for the year - - - 2,877 - 2,877
Other comprehensive income - - - - 21 21
Total comprehensive income - - - 2,877 21 2,898
Transactions with owners:
Dividends - - - (288) - (288)
Share based payment charges - - - 1,050 - 1,050
Exercise of share options - 30 - - - 30
Shares issued as consideration for business combinations 1 - 1,499 - - 1,500
At 31 July 2020 116 6,373 5,420 41,078 38 53,025
At 1 August 2020 116 6,373 5,420 41,078 38 53,025
Profit for the year - - - 2,356 - 2,356
Other comprehensive income - - - - (126) (126)
Total comprehensive income - - - 2,356 (126) 2,230
Transactions with owners:
Share based payment charges - - - 1,276 - 1,276
Exercise of share options 1 28 - - - 29
Shares issued as consideration for business combinations - - 105 - - 105
At 31 July 2021 117 6,401 5,525 44,710 (88) 56,665
Consolidated Cash Flow Statement
2021 2020
Note £000 £000
Operating activities
Profit for the year 2,356 2,877
Finance income (11) (76)
Finance expense 98 79
Depreciation 1,603 1,882
Profit on disposal of plant and equipment (46) (12)
Non cash exceptional items 985 (320)
Other operating income (440) (376)
Amortisation of intangible assets 4,269 3,599
Share of result of equity accounted investees 434 309
Income tax charge 2,279 1,234
Share based payment charges 1,276 1,050
Operating cash inflow before changes in working capital 12,803 10,246
Movement in inventories 49 (49)
Movement in trade and other receivables (4,796) 5,121
Movement in trade and other payables 2,784 (3,875)
Cash generated from operations 10,840 11,443
Interest received 7 76
Interest paid (74) (79)
Income tax paid (1,417) (908)
Net cash flow from operating activities 9,356 10,532
Investing activities
Purchase of plant and equipment (400) (387)
Proceeds from disposal of plant and equipment 88 66
Acquisition of subsidiaries (net of cash acquired) 7 127 (13,852)
Payment of contingent consideration 8 (410) (1,228)
Net cash flow used in investing activities (595) (15,401)
Financing activities
Dividends paid 5 - (288)
Proceeds from exercise of share options 27 30
Lease liability payments (1,260) (1,089)
Lease receivable receipts 32 11
Net cash flow used in financing activities (1,201) (1,336)
Net increase/(decrease) in cash and cash equivalents 7,560 (6,205)
Exchange adjustments (93) 21
Cash and cash equivalents at the beginning of the year 17,920 24,104
Cash and cash equivalents at the end of the year 25,387 17,920
Notes to the Consolidated Financial Statements
1 Financial information
The financial information set out herein does not constitute the Group's
statutory accounts for the 12 months 31 July 2021 or the year ended 31 July
2020 within the meaning of sections 434 of the Companies Act 2006, but is
derived from those accounts. The audited accounts for the year ended 31 July
2021 will be posted to all shareholders in due course and will be available on
the Group's website. The auditors have reported on those accounts and
expressed an unmodified audit opinion which did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
The financial information for the year ended 31 July 2020 is derived from the
statutory accounts for that year, which have been delivered to the Registrar
of Companies. The auditors have reported on those accounts and expressed an
unmodified audit opinion which did not contain a statement under section 498
(2) or (3) of the Companies Act 2006.
Selected explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in financial position
and performance of the Group.
2 Basis of preparation
(a) Statement of compliance
The Group consolidated financial statements have been prepared in accordance
with International Accounting Standards in conformity with the Companies Act
2006 ("IFRSs").
(b) Basis of measurement
The Accounts have been prepared under the historical cost convention, with the
exception of the valuation of investments, contingent consideration, financial
liabilities and initial valuation of assets and liabilities acquired in
business combinations which are included on a fair value basis.
(c) Functional and presentation currency
These consolidated financial statements are presented in sterling. All
financial information presented in sterling has been rounded to the nearest
thousand.
(d) Use of estimates and judgements
The preparation of financial statements in conformity with IFRSs requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. Judgements and estimates in relation to revenue recognition,
intangible fixed assets, contingent consideration, and IFRS 16 leases are
consistent with the prior year with the exception of estimation uncertainty in
relation to Revenue which is no longer considered to be significant. There is
still considered to be significant judgement over Revenue The Directors have
made an additional judgement in assessing the accounting for the investment in
Vivacity Labs Limited applying IAS 28 Investment in Associates and Joint
Ventures (2011). In the financial year the Group holding in Vivacity Labs
Limited fell below 20% to 17.6%, however the Group continued to maintain a
Board seat and take an active role in the future development of Vivacity Labs
Limited. Considering the criteria set out in IAS 28 it was determined that the
Group continues to exert significant influence over Vivacity Labs Limited and
the investment continues to be accounted for using the equity method.
The estimates and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision only affects that period, or in the period
of the revision and future periods, if the revision affects both current and
future periods.
(e) Accounting Developments
The Group and Company financial statements have been prepared and approved by
the directors in accordance with International Accounting Standards in
conformity with the Companies Act 2006 ("IFRSs"). The accounting policies
have been applied consistently to all periods presented in the consolidated
financial statements, unless otherwise stated.
There are no new standards, amendments to existing standards or
interpretations that are not yet effective that are expected to have a
material impact on the Group.
(f) Going concern
The Group is debt free and has substantial cash resources. At 31 July 2021 the
Group had net cash and cash equivalents totalling £25.4m. The Board has
prepared cash flow forecasts for the forthcoming year based upon assumptions
for trading and the requirements for cash resources, these forecasts take into
account reasonably possible changes in trading financial performance and
include an expectation of the Group's continued recovery from the impact of
Covid-19 predominantly on entities within the Data, Analytics, Consultancy and
Events segment.
Further to this, management prepared a severe but plausible scenario, reducing
revenues from budget and including a more pessimistic view of working capital.
There was still ample headroom under this scenario. A reverse stress test was
also considered. The revenue and cashflow assumptions required to eliminate
any headroom under the reverse stress test are considered by the Board to be
highly unlikely and particularly given trading performance to date.
Based upon this analysis, the Board has concluded that the Group has adequate
working capital resources and that it is appropriate to use the going concern
basis for the preparation of the consolidated financial statements.
3 Revenue and Segmental Analysis
a) Revenue
Sales revenue is summarised below
2021 2020
£000 £000
Rail Technology & Services 26,424 23,441
Data, Analytics, Consultancy and Events 23,813 24,557
Total revenue 50,237 47,998
As reported in the Group's final results for the year ended 31 July 2020, the
Group has been reorganised into a new segmental structure to better align with
key areas of future growth. See note 3b for further details of this change.
Comparative periods have been re-stated to reflect these segments.
Revenue can also be analysed as follows:
2021 2020
£000 £000
Software and related services 20,980 18,840
Other 29,257 29,158
Total 50,237 47,998
Major customers
Transactions with the Group's largest customer represent 17% of the Group's
total revenues (2020: 21%).
Geographic split of revenue
A geographical analysis of revenue is provided below:
2021 2020
£000 £000
United Kingdom 43,965 41,529
Ireland 5,449 5,885
Rest of Europe 338 242
North America 189 57
Rest of the World 296 285
Total 50,237 47,998
b) Segmental analysis
As reported in the Group's final results for the year ended 31 July 2020, the
Group has been reorganised into a new segmental structure in order to align
with key areas of future growth. The Group has divided its results into two
segments being 'Rail Technology & Services' and 'Data, Analytics,
Consultancy & Events'. As a result of this change the results of one
subsidiary entity are now presented within the Data, Analytics, Consultancy
& Events which were previously presented in the Traffic & Data
Services segment. Flash Forward Consulting Limited is included in 'Data,
Analytics, Consultancy & Events'. The comparatives included in these
financial statements have been re-stated to reflect the new segmental
structure.
The Group has a wide range of products and services and products and services
for the rail industry, such as software, hosting services, and remote
condition monitoring, and these have been included within the Rail Technology
& Services segment as they have similar customer bases (such as Train
Operating Companies and Infrastructure Providers). Traffic data collection and
event planning & traffic management, and data and analytics and
consultancy offerings have similar economic characteristics and distribution
methods and so have been included within the Data, Analytics, Consultancy
& Events segment.
In accordance with IFRS 8 'Operating Segments', the Group has made the
following considerations to arrive at the disclosure made in these financial
statements. IFRS 8 requires consideration of the Chief Operating Decision
Maker ("CODM") within the Group. In line with the Group's internal reporting
framework and management structure, the key strategic and operating decisions
are made by the Executive Directors, who review internal monthly management
reports, budgets and forecast information as part of this. Accordingly, the
Executive Directors are deemed to be the CODM.
Operating segments have then been identified based on the internal reporting
information and management structures within the Group. From such information
it has been noted that the CODM reviews the business as two operating
segments, receiving internal information on that basis. The management
structure and allocation of key resources, such as operational and
administrative resources, are arranged on a centralised basis.
Reconciliations of reportable segment revenues, profit or loss, assets and
liabilities and other material items
Information regarding the results of the reportable segment is included below.
Performance is measured based on segment profit before income tax, as included
in the internal management reports that are reviewed by the Board of
Directors. Segment profit is used to measure performance. There are no
material inter-segment transactions, however, when they do occur, pricing
between segments is determined on an arm's length basis. Revenues disclosed
below materially represent revenues to external customers.
As noted previously the segmental structure has changed from the previous
financial year end. As a result of this change the results of one subsidiary
entity are now presented within the Data, Analytics, Consultancy & Events
which were previously presented in the Traffic & Data Services segment.
2020 results presented below reflect this new segmental structure.
2021
Rail Technology & Services Total
Data, Analytics, Consultancy & Events
Unallocated
£000 £000 £000 £000
Revenues
Total revenue for reportable segments 26,424 23,813 - 50,237
Consolidated revenue 26,424 23,813 - 50,237
Profit or loss
EBITDA for reportable segments 9,059 3,919 - 12,978
Amortisation of intangible assets - - (4,269) (4,269)
Depreciation (699) (904) - (1,603)
Exceptional items (net) - - (1,114) (1,114)
Other operating income - - 440 440
Share-based payment charges - - (1,276) (1,276)
Interest receivable/payable(net) (36) (37) (14) (87)
Share of result of equity accounted investees - - (434) (434)
Consolidated profit before tax 8,324 2,978 (6,667) 4,635
2020
Rail Technology & Services Total
Data, Analytics, Consultancy & Events
Unallocated
£000 £000 £000 £000
Revenues
Total revenue for reportable segments 23,441 24,557 - 47,998
Consolidated revenue 23,441 24,557 - 47,998
Profit or loss
EBITDA for reportable segments 8,633 1,830 - 10,463
Amortisation of intangible assets - - (3,599) (3,599)
Depreciation (589) (1,293) - (1,882)
Exceptional items (net) - - 115 115
Other operating income - - 376 376
Share-based payment charges - - (1,050) (1,050)
Interest receivable/payable(net) 33 (36) - (3)
Share of result of equity accounted investees - - (309) (309)
Consolidated profit before tax 8,077 501 (4,467) 4,111
2021
Rail Technology & Services Data, Analytics, Consultancy & Events
Total
Unallocated
£'000 £000 £000 £000
Assets
Total assets for reportable segments (exc. cash) 6,515 8,669 - 15,184
Intangible assets and investments - - 52,400 52,400
Deferred tax assets - - 551 551
Cash and cash equivalents 16,862 6,483 2,042 25,387
Consolidated total assets 23,377 15,152 54,993 93,522
Liabilities
Total liabilities for reportable segments (11,913) (7,036) (590) (19,539)
Deferred tax liabilities - - (8,517) (8,517)
Contingent consideration - - (7,909) (7,909)
Deferred consideration - - (892) (892)
Consolidated total liabilities (11,913) (7,036) (17,908) (36,857)
2020
Rail Technology & Services Data, Analytics, Consultancy & Events
Total
Unallocated
£'000 £000 £000 £000
Assets
Total assets for reportable segments (exc. cash) 5,070 5,323 - 10,393
Intangible assets and investments - - 55,465 55,465
Deferred tax assets - - 877 877
Cash and cash equivalents 11,103 4,827 1,990 17,920
Consolidated total assets 16,173 10,150 58,332 84,655
Liabilities
Total liabilities for reportable segments (11,562) (4,500) - (16,062)
Deferred tax liabilities - - (8,234) (8,234)
Contingent consideration - - (7,334) (7,334)
Consolidated total liabilities (11,562) (4,500) (15,568) (31,630)
4 Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 July 2021 was based on the
profit attributable to ordinary shareholders of £2,356,000 (2020:
£2,877,000) and a weighted average number of ordinary shares in issue of
29,229,000 (2020: 28,919,000), calculated as follows:
Weighted average number of ordinary shares
In thousands of shares
2021 2020
Issued ordinary shares at 1 August 29,122 28,749
Effect of shares issued related to business combinations 7 76
Effect of shares issued for cash 100 94
Weighted average number of shares at 31 July 29,229 28,919
Diluted earnings per share
The calculation of diluted earnings per share at 31 July 2021 was based on
profit attributable to ordinary shareholders of £2,356,000 (2020:
£2,877,000) and a weighted average number of ordinary shares in issue after
adjustment for the effects of all dilutive potential ordinary shares of
30,131,000 (2020: 29,740,000).
Adjusted EPS
In addition, Adjusted Profit EPS is shown below on the grounds that it is a
common metric used by the market in monitoring similar businesses. These
figures are relevant to the Group and are provided to provide a comparison to
similar businesses and are metrics used by Equities Analysts who cover the
Group. The largest components of the adjusting items, being amortisation, and
share based payment charges are deemed to be 'non cash' in nature, and
therefore excluded in order to assist with the understanding of underlying
trading. A reconciliation of this figure is provided below. The Group has also
presented an 'Adjusted Profit' metric as detailed in note 6, with the key
difference between the numbers presented below, and those disclosed in note 6
being the income tax charge.
2021 2020
£'000 £'000
Profit attributable to ordinary shareholders 2,356 2,877
Amortisation of intangible assets 4,269 3,599
Share-based payment charges 1,276 1,050
Exceptional items (net) 1,114 (115)
Other operating income (440) (376)
Tax impact of adjusting items 746 (55)
Adjusted profit for EPS purposes 9,321 6,980
Weighted average number of ordinary shares
In thousands of shares
For the purposes of calculating Basic earnings per share 29,229 28,919
Adjustment for the effects of all dilutive potential ordinary shares 902 821
For the purposes of calculating Dilutive earnings per share 30,131 29,740
Basic adjusted earnings per share 31.89p 24.14p
Diluted adjusted earnings per share 30.93p 23.47p
5 Dividends
The Group introduced a progressive dividend policy during previous years. In
order to protect jobs in the Group that would otherwise have been at risk, the
Group utilised the Coronavirus Job Retention Scheme ("CJRS") in respect of
furloughed staff in the year. In this context, the Board does not consider it
appropriate to pay a final dividend this year. The Board expects to restore
the progressive dividend policy for the year ending 31 July 2022. The cash
cost of the dividend payments is below:
2021 2020
£000 £000
Final dividend for 2018/19 of 1.0p per share paid - 288
Total dividends paid - 288
6 Reconciliation of Alternative Performance Measures
("APMs")
The Group uses APMs, which are not defined or specified under the requirements
of International Financial Reporting Standards ("IFRS"), to improve the
comparability of reporting between different periods. These metrics are used
by Equities Analysts who cover the Group as they reflect the underlying
performance of the Group, and its ability to generate cash. The largest
components of the adjusting items, being depreciation, amortisation, share
based payments, and share of result of equity accounted investees, are 'non
cash' items and are separately analysed to assist with the understanding of
underlying trading. Share based payments are adjusted to reflect the
underlying performance of the group as the fair value is impacted by market
volatility that does not correlate directly to trading performance. APMs are
used by the Directors and management for performance analysis, planning,
reporting and incentive purposes.
Adjusted EBITDA
Calculated as Earnings before finance income, tax, depreciation, amortisation,
exceptional items, other operating income, share-based payment charges and
share of result of equity accounted investees. This metric is used to show the
underlying trading performance of the Group from period to period in a
consistent manner, and is a key management incentive metric. The closest
equivalent statutory measure is profit before tax. Adjusted EBITDA can be
reconciled to statutory profit before tax as set out below:
2021 2020
£000 £000
Profit before tax 4,635 4,111
Finance expense - net 87 3
Share-based payment charges 1,276 1,050
Exceptional items - net 1,114 (115)
Other operating income (440) (376)
Amortisation of intangible assets 4,269 3,599
Depreciation 1,603 1,882
Share of result of equity accounted investees 434 309
Adjusted EBITDA 12,978 10,463
Adjusted Profit
Calculated as Earnings before finance income, tax, amortisation, exceptional
items, other operating income, share-based payment charges, and share of
result of equity accounted investees. This metric is used to show the
underlying business performance of the Group from period to period in a
consistent manner. The closest equivalent statutory measure is profit before
tax. Adjusted profit can be reconciled to statutory profit before tax as set
out below:
2021 2020
£000 £000
Profit before tax 4,635 4,111
Finance expense - net 87 3
Share-based payment charges 1,276 1,050
Exceptional items - net 1,114 (115)
Other operating income (440) (376)
Amortisation of intangible assets 4,269 3,599
Share of result of equity accounted investees 434 309
Adjusted profit 11,375 8,581
Adjusted EBITDA reconciles to adjusted profit as set out below:
2021 2020
£000 £000
Adjusted EBITDA 12,978 10,463
Depreciation (1,603) (1,882)
Adjusted profit 11,375 8,581
Adjusted Basic Earnings per Share
Calculated as profit after tax before amortisation, share-based payment
charges, exceptional items and other operating income divided by the weighted
average number of ordinary shares in issue during the period. This is a common
metric used by the market in monitoring similar businesses and is used by
Equities Analysts who cover the Group to better understand the underlying
performance of the Group. See note 4 "Earnings per share".
7 Acquisitions and Investments in the current year
On 26 February 2021 the Group acquired Flash Forward Consulting Limited
("FFC"), a UK based transport consultancy business that operates predominantly
across the rail and bus sectors. It has a well established senior level
network across the transport owning groups, local and central transport
governing authorities and Network Rail and offers a range of strategic and
practical technical consultancy services. The acquisition aligns with the
strategic objective of the Group to expand the existing consultancy offering
to customers across the transport industries. On completion of the acquisition
FFC has been consolidated with the Group's existing Rail Consulting and
Passenger Analytics businesses to form a new business unit "Tracsis Transport
Consultancy" under the existing Tracsis Rail Consultancy Limited statutory
entity.
The acquisition consideration comprised an initial cash payment of £1.1m to
reflect the net current asset position of the business which was funded out of
Tracsis cash reserves and the issue of shares in Tracsis to a value of
£0.1m. Deferred consideration totalling £0.9m is payable in three equal
instalments on the first, second and third anniversary of the acquisition.
Additionally the sellers were allotted 10,225 "A" shares in Tracsis Rail
Consultancy Limited which have an assessed fair value of £0.6m at the
acquisition date. The "A" shares have full dividend and capital distribution
rights attached but do not have any voting rights attached to them. "A" shares
guarantee the holder a dividend each financial year.
The A ordinary shares are classified as financial liabilities due to the
shares having no voting rights and the dividend rights attached to them. The
financial liability is held at fair value with changes recognised in the
profit and loss. The fair value of the A shares has been calculated with
reference to discounted future cashflows from the Tracsis Transport
Consultancy business unit which has been assessed as £590,000 at the
acquisition date, which will be included at amortised cost going forward. The
Group holds a call option to re-purchase the full amount of "A" shares for a
pre-determined multiple of Profit before Tax from two years after the
acquisition date, and which is accounted for at Fair Value through Profit and
Loss (FVTPL).
The business is cash generative and debt free. In the period from acquisition
to 31 July 2021 Flash Forward Consulting contributed revenue to the Group of
£0.4m and pre tax profit of £36,000, before amortisation of associated
intangible assets and exceptional deal costs. If the acquisition had occurred
on 1 August 2020 management estimates that the contribution to Group revenue
would have been £1.1m and Group pre tax profit for the period of £0.2m. The
fair value of intangible assets will be assessed throughout the measurement
period up to 12 months from the date of acquisition.
Pre-acquisition carrying amounts were determined based on applicable IFRSs,
immediately prior to the acquisition. The values of assets and liabilities
recognised on acquisition are the estimated fair values. The gross contractual
amounts receivable for acquired receivables is consistent with fair value.
Acquired receivables are expected to be collected in full following
acquisition.
The goodwill that arose on acquisition can be attributed to a multitude of
assets that cannot readily be separately identified for the purposes of fair
value accounting.
The fair value adjustments arise in accordance with the requirements of IFRSs
to recognise intangible assets acquired. In determining the fair values of
intangible assets the Group has used discounted cash flow forecasts. The fair
value of shares issued was based on market value at the date of issue. The
Group incurred acquisition related costs of £0.1m which are included within
administrative expenses.
The acquisition had the following effect on the Group's assets and liabilities
on the acquisition date:
Recognised
Pre-acquisition Fair value value on
carrying amount adjustments acquisition
£000 £000 £000
Intangible assets: Customer related intangibles - 684 684
Tangible fixed assets 1 - 1
Cash and cash equivalents 1,269 - 1,269
Trade and other receivables 143 - 143
Trade and other payables (157) - (157)
Income tax payable (49) - (49)
Deferred tax liability - (130) (130)
Net identified assets and liabilities 1,207 554 1,761
Goodwill on acquisition 954
2,715
Consideration paid in cash 1,142
Consideration paid: fair value of shares issued 105
Present value of deferred consideration payable 878
Interest in Tracsis Rail Consultancy Limited 590
Total consideration 2,715
8 Contingent and Deferred Consideration
a. Contingent consideration
During the previous financial year, the Group acquired iBlocks Limited. Under
the share purchase agreement in place for this acquisition, contingent
consideration is payable which is linked to the profitability of the acquired
business for a three year period post acquisition and the signing of certain
contracts currently under negotiation. The maximum amount payable is £8.5m,
and the fair value of the amount payable was assessed at £2.8m at the year
end date.
In 2019, the Group acquired Cash & Traffic Management Limited, Compass
Informatics Limited and Bellvedi Limited. Under the share purchase agreements
for each of these companies, contingent consideration is payable which is
linked to the profitability of the acquired businesses over a two to four year
period post acquisition. The maximum amount payable is £750,000 for Cash
& Traffic Management Limited, €2,000,000 for Compass Informatics Limited
and £7,900,000 for Bellvedi Limited. The fair value of the amount payable was
assessed at £253,000 for Cash & Traffic Management Limited, £462,000 for
Compass Informatics Limited and £4,357,000 for Bellvedi Limited.
During the financial year, contingent consideration of £410,000 was paid in
respect of the Compass Informatics Limited acquisition which was made in year
ended 31 July 2019 (2020: £332,000), £nil in respect of the Cash &
Traffic Management Limited acquisition which was made in year ended 31 July
2019 (2020: £491,000), £nil in respect of the Bellvedi Limited acquisition
which was made in the year ended 31 July 2019 (2020: £57,000), and £nil
(2020: £348,000) in respect of the acquisition of Tracsis Travel Compensation
Services Limited which was made in the year ended 31 July 2018.
As detailed in note 9, a net exceptional charge of £327,000 was recognised
following a review of the assumptions of the fair value of the contingent
consideration as at 31 July 2021. At the balance sheet date, the Directors
assessed the fair value of the remaining amounts payable which were deemed to
be as follows.
2021 2020
£000 £000
Tracsis Travel Compensation Services Limited & Delay Repay Sniper Ltd - 88
Cash & Travel Management Limited 253 112
Compass Informatics Limited 462 681
Bellvedi Limited 4,357 3,193
iBlocks Limited 2,837 3,260
7,909 7,334
The Group has made numerous acquisitions over the past few years and carries
contingent consideration payable in respect of them, which is considered to be
a 'Level 3 financial liability' as defined by IFRS 13. These are carried at
fair value, which is based on the estimated amounts payable based on the
provisions of the Share Purchase Agreements which specify the specific
arrangements and calculations relating to each acquisition. This involves
assumptions about future profit forecasts, which results from assumptions
about revenues and costs, and is discounted back to the present value using an
appropriate discount rate and an estimate of when it is expected to be
payable. A range of outcomes is considered, and a probability/likelihood
weighting is applied to each of them in order to produce a weighted assessment
of the amount payable.
The Group has considered multiple profit related scenarios in estimating the
fair value of contingent consideration payable in the future. In all cases,
contingent consideration payable could range from zero to the maximum amount
included in the Share Purchase Agreements as detailed in this note and also
note 7. Each Share Purchase Agreement contains different provisions for
calculating contingent consideration, timeframes over which it is calculated
and payable, and therefore sensitivities regarding the total amount to be
paid. Contingent consideration in respect of Cash & Traffic Management
Limited was paid in October 2021 totalling £0.3m. In respect of Compass
Informatics Limited, Bellvedi Limited and iBlocks Limited a change in the
estimated profit of 10% would result in a change in the fair value of
contingent consideration of £1.1m.
The movement on contingent consideration can be summarised as follows:
2021 2020
£000 £000
At the start of the year 7,334 6,183
Arising on acquisition - 3,854
Cash payment (410) (1,228)
Fair value adjustment to Statement of Comprehensive Income 327 (1,475)
Unwind of discounting 658 -
At the end of the year 7,909 7,334
The ageing profile of the remaining liabilities can be summarised as follows:
2021 2020
£000 £000
Payable in less than one year 4,689 1,747
Payable in more than one year 3,220 5,587
Total 7,909 7,334
b. Deferred consideration
The Group acquired Flash Forward Consulting Limited on 26 February 2021. As
part of this acquisition cash consideration totalling £945,000 is payable in
three equal instalments on the 1st, 2nd and 3rd anniversary of the acquisition
date. At acquisition the present value of this deferred consideration was
assessed as £878,000 discounted using a rate of 3.75%. At 31 July 2021 the
present value of this deferred consideration is £892,000. The movement on
deferred consideration can be summarised as follows:
2021 2020
£000 £000
At the start of the year - -
Arising on acquisition (note 7) 878 -
Unwind of discounting 14 -
At the end of the year 892 -
The ageing profile of the remaining liabilities can be summarised as follows:
2021 2020
£000 £000
Payable in less than one year 308 -
Payable in more than one year 584 -
Total 892 -
9 Exceptional Items
The Group incurred a number of exceptional items in 2021 and 2020 which are
analysed as follows:
2021 2020
£000 £000
Impairment losses
Non cash:
Goodwill and investment impairment - 1,155
Total impairment losses - 1,155
Other
Non cash:
Contingent consideration fair value adjustment 327 (1,475)
Unwind of discounting of contingent consideration 658 -
Cash:
Legal and professional fees in respect of acquisitions 129 205
Total other 1,114 (1,270)
Total exceptional items 1,114 (115)
2021
During 2021 the Group acquired Flash Forward Consulting Limited and incurred
exceptional deal related costs totalling £129,000 in relation to this. A net
exceptional charge of £327,000 has also been recognised in the year to
increase the assessed fair value of the contingent consideration based on
future expectations of performance of the entities. The increase in the fair
value of contingent consideration payable principally reflects an increased
pipeline of software contract opportunities, partly offset by some extension
of procurement cycles from certain customers. Unwind of discounting of
contingent consideration totalling £0.7m was completed in the year.
Contingent consideration at 31 July 2021 has been discounted at 12% (31 July
2020: 12%). A breakdown of the remaining fair value of contingent
consideration by acquisition is included in note 8. These costs are deemed to
be exceptional items due to the size and volatility of the items which can
vary significantly from year to year.
2020
In the previous financial year the Group incurred £205,000 of costs relating
to the acquisition of iBlocks Limited. In addition, the Group reviewed the
carrying value of the investment in Citi Logik Limited and concluded it was
impaired, and as such a loss of £300,000 was recognised. A further impairment
charge of £855,000 was also made against the remaining intangible assets of
Tracsis Travel Compensation Services Limited. During the year, an exceptional
credit of £1,475,000 was recognised due to a change in accounting estimate
arising from the review of the assumptions of the fair value of the contingent
consideration relating to recent acquisitions. The overall level of contingent
consideration payable was assessed as being lower than in previous years due
to reduced profit expectations and also using a higher discount rate, given
the impact of Covid-19.
10 Subsequent Events
Post year end the Group acquired Icon Group ("Icon") on 3 November 2021.
Headquartered in Dublin, Icon is an interdisciplinary geoscience business who
specialise in earth observation (EO), GIS and spatial data analytics. Icon
will be integrated with Tracsis' existing Data Analytics/GIS solutions
provider Compass Informatics to create an Irish-based Data Analytics centre of
excellence specialising in providing location-related technologies and
analytics solutions and services to government and commercial organisations.
The acquisition of Icon adds EO capabilities that enhance our offer in this
growing market, and has a customer base that is complementary to Tracsis'.
The acquisition consideration comprises an initial cash payment of £1.9m
which will be funded out of Tracsis cash reserves and the issue of 68,762 new
ordinary shares in Tracsis to a value of £0.6m. An additional payment of
approximately £1.7m will be made on a euro for euro basis to reflect the net
current asset position of the business (above a working capital hurdle) at
completion and will be finalised in due course. Additional contingent
consideration of up to £1.5m is payable subject to Icon Group achieving
certain stretched financial targets in the three years post acquisition. A
formal valuation exercise has not yet been completed due to the timing of the
acquisition.
11 Annual Report and Annual General Meeting
The Company anticipates dispatching a copy of its annual report and accounts
to all shareholders in December 2021. A copy will also be available on the
Company's website: www.tracsis.com (http://www.tracsis.com) . The Annual
General Meeting of the Company will be held at Nexus, Discovery Way, Leeds,
LS2 3AA on 18 January 2022 at 1pm.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FFFLVLDLAIILRecent news on Tracsis
See all newsREG - Tracsis PLC - Total Voting Rights
AnnouncementREG - Tracsis PLC - Director/PDMR Shareholding
AnnouncementREG - Tracsis PLC - Interim Results
AnnouncementREG - Tracsis PLC - Director/PDMR Shareholding
AnnouncementREG - Tracsis PLC - Total Voting Rights
Announcement