REG - Tracsis PLC - Final Results
09/11/2022 07:01
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221109:nRSI7263Fa&default-theme=true
RNS Number : 7263F Tracsis PLC 09 November 2022
Tracsis plc
('Tracsis', 'the Company' or 'the Group')
Audited results for the year ended 31 July 2022
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 2022.
Financial Highlights:
· Strong financial performance with high levels of organic and
acquisitive growth
· Revenue increased by 37% to £68.7m (2021: £50.2m)
o Organic revenue growth of 24%
o 63% revenue growth in Data, Analytics, Consultancy and Events Division,
including post-Covid recovery and contribution from acquisitions
o Rail Technology and Services Division revenue increased by 13% including
the benefit from multi-year software contract wins that went live during the
year and the RailComm acquisition
· Adjusted EBITDA* increased by 9% to £14.2m (2021: £13.0m)
· Profit before tax of £2.6m (2021: £4.6m) after £3.1m of
exceptional items including increase in fair value of contingent consideration
and transaction costs associated with acquisition of businesses
· Total cash balances** of £17.2m with no debt (31 July 2021:
£25.4m) after £13.5m net investment in acquisitions, and contingent and
deferred consideration
· Proposed final dividend of 1.1p per share, with total dividend of
2.0p per share (2021: nil) consistent with the Group's progressive dividend
policy that was restored at the half-year
Operational Highlights:
· Strong growth in rail technology software licence usage:
o First full deployment of TRACS Enterprise went live in summer 2022. Work
continues on delivering our orderbook of further deployments from previously
announced contract wins
o Roll-out of RailHub enterprise software contract won in the prior year
progressing to plan and will more than double the user base to c.40,000
individuals by late 2022
o 20% growth in user base of Centrix, our cloud-base Remote Condition
Monitoring data acquisition platform
· Won several multi-year rail technology software contracts as
previously announced, that will support further revenue growth
· Acquisition of RailComm LLC ("RailComm") a US based rail
technology software and services provider, giving direct access to the large
and growing North American market. RailComm has performed well post
acquisition
· Strong post-Covid recovery of activities in Events and Traffic
Data, made possible by actions taken to safeguard these businesses during the
pandemic, and including some activities not expected to repeat in the
forthcoming financial year
· Enhanced the Group's technology capabilities with the acquisition
of geoscience company Icon GEO, now fully integrated
· Formalised our sustainability strategy, with a target of being
carbon neutral by 2030 for scope 1 and scope 2 emissions from Tracsis
operations
· Further progress in implementing a more integrated operating
model to support future growth, with continued investment in management
capability, people development, and common processes and systems
( )
( )
* Earnings before net finance 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.
** Cash and cash equivalents, and cash held in escrow
Chris Barnes, Chief Executive Officer, commented:
"I am pleased with the progress the Group has made this year in executing its
growth strategy.
We have delivered a financial performance aligned to our long term strategic
growth plan, with high levels of organic and acquisitive growth. Our Rail
Technology and Services Division has won several multi-year software
contracts, and in Data, Analytics, Consultancy and Events we have seen a
strong post-Covid recovery in activity levels.
We have a growing pipeline of opportunities in both Divisions, and we have
expanded our addressable markets including our first direct entry into the
large and growing North America rail market with the acquisition of RailComm.
The post-acquisition performance of this business has been particularly
pleasing, with good revenue and profit performance, new orders secured for its
core products, and an encouraging level of interest in products from elsewhere
in the Group that are already well established in the UK. These opportunities
leave us well placed to deliver further growth.
The UK rail industry's transition to a new Great British Railways structure is
ongoing and the overall objective is to create a data-driven,
customer-focused, safety-critical future for the industry. Digital
transformation will play a significant role in the industry's transition and
our range of rail technology products and services is well placed to help the
rail industry deliver operational performance improvements and efficiency
savings.
We continue to invest in implementing a more integrated operating model to
help us to execute our growth strategy. I was particularly pleased to see the
launch of the OneTracsis leadership development programme during the year,
which is an important initiative as part of our commitment to investing in
developing our people and growing the next generation of leaders in our
business. We are also making good progress in implementing a single groupwide
IT operating model, under the direction of an experienced technology leader
who has been recruited to further enhance senior management bandwidth.
Tracsis is fully committed to delivering sustainable growth that benefits the
communities in which we, and our customers, operate. The Group's products and
services are well aligned with this vision, and support our customers in
delivering positive environmental and social outcomes. This year we have
formalised our sustainability strategy and set ourselves the ambition of being
carbon neutral by 2030 for scope 1 and scope 2 emissions from Tracsis
operations.
Q1 trading is in line with the Board's expectations. We are confident that
there are strong growth prospects for all parts of our 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."
Presentation and Overview videos
Tracsis is hosting an online presentation open to all investors on Friday 11
November 2022 at 1.00pm UK time. Anyone wishing to connect should register
here: https://bit.ly/TRCS_FY22_results (https://bit.ly/TRCS_FY22_results)
A video overview of the results featuring CEO Chris Barnes and CFO Andy Kelly
is available to view here: https://bit.ly/TRCS_FY22_overview
(https://bit.ly/TRCS_FY22_overview)
Tracsis will be presenting at the MelloLondon investor conference on Wednesday
16 November 2022. Further information is available here: MelloLondon ticket
page - Mello Events (https://melloevents.com/mello-london-tickets/)
Demonstration videos of the Group's TRACS Enterprise, Remote Condition
Monitoring, Smart Ticketing, and Safety and Risk Management rail technology
products are available to view here: Rail Technology Product Demonstration for
Investors | Tracsis
(https://tracsis.com/investors/investors-day/rail-technology-product-demonstration-for-investors/)
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 de Silva Corporate Broking
Alma
PR
Tel: 020 3405 0205
David Ison / Hilary Buchanan / Joe
Pederzolli
tracsis@almapr.co.uk
Management Overview
Introduction
The Group has performed well during the year ended 31 July 2022, delivering
strong organic and acquisitive growth, winning new multi-year software
contracts that will support further growth in recurring revenues, expanding
its addressable rail market into North America and its technology offering
into earth observation, and making further progress in implementing a more
integrated operating model.
Large multi-year software contract wins and deployments support further Rail
Technology and Services revenue growth
We continue to secure multi-year technology contracts in the Rail Technology
and Services Division that will support further growth in annual recurring
licence revenue consistent with our strategy. During the year we secured new
contracts for our TRACS Enterprise, Centrix, Pay As You Go ("PAYG") smart
ticketing and delay repay technologies previously announced, and we have a
strong pipeline of further opportunities. We are also making good progress in
implementing large contracts that were won in previous years. The first
end-to-end deployment of TRACS Enterprise went live with a large Train
Operating Company ("TOC") in summer 2022, replacing disparate legacy systems,
and we have a pipeline of further passenger and freight implementations for
this product that are due to go-live through the next two financial years. The
roll-out of the large RailHub contract won in July 2021 has been progressing
to plan and is on schedule to be completed before the end of 2022, which will
double the user base for this product to over 40,000 individuals. Post
year-end we have secured further orders for the next phase of development of
the RailHub product. The conversion of our large pipeline of opportunities is
delivering growth in annual recurring and routinely repeat revenue(+). For the
Rail Technology and Services Division this increased in the year by 13% to
£21.1m.
(+) Recurring software licence revenue and annually repeating hardware revenue
from framework agreements.
Significant recovery completed in Events and Traffic Data
We have seen a significant recovery in activity levels in the Events and
Traffic Data businesses that were most impacted by Covid-19. Both were able to
respond quickly to improving market demand as a result of the actions taken to
safeguard those businesses and protect jobs and skills during the pandemic.
Activity levels in Events returned to pre-pandemic levels in the first half of
the year and maintained this through the remainder of the year. The final
quarter in particular saw very high volumes as demand for sporting and music
events increased. The performance in the year included some activities that
are not expected to repeat in the forthcoming financial year. The recovery in
Traffic Data was slower, however in this market we also saw demand return
close to pre-pandemic levels in the final quarter of the year. Activity levels
in this market are more sensitive to central and local authority funding.
Alongside the incremental contribution from the acquisitions of Icon GEO in
November 2021 and Flash Forward Consulting in February 2021, this recovery in
activity levels drove extremely strong revenue growth in the Data, Analytics,
Consultancy and Events Division of 63%.
US growth strategy underway, with RailComm performing well
The acquisition of RailComm in March 2022 provides direct access to the large
and growing North American rail market. There are opportunities to deliver
growth both in RailComm's core markets of rail yard automation and computer
aided dispatching, as well as by progressively marketing Tracsis' existing
portfolio of rail products and services. An experienced Tracsis rail managing
director has relocated to the US to oversee delivery of this growth strategy.
RailComm has performed well since acquisition, delivering a good revenue and
profit performance and winning new contracts for its core products.
Implementation work continues on a number of large projects with North
American customers that will support further revenue and profit growth. We are
seeing good levels of interest in our Remote Condition Monitoring, Movement
Planner and Crew Calling solutions that are already well established in the UK
rail market.
Continuing to build the foundations for future growth
The Group has made further good progress this year in implementing a more
integrated business model and adopting common processes and systems. As part
of our commitment to investing in our people we have launched a 'OneTracsis'
leadership development scheme with 100 managers and senior leaders enrolled on
an 18 month programme that will also promote collaboration and innovation
across the Group. This is part of a comprehensive people strategy that has
been developed, under a new Group People Director, with a focus on succession
planning, talent acquisition, and reward & benefits. We are expanding our
shared services operating model by implementing a single groupwide IT
operating environment, under the direction of a Group Managing Director who
was recruited in the year and is an experienced technology leader.
Furthermore, we have formalised our sustainability strategy and targets, with
the goal of making Tracsis carbon neutral for scope 1 and scope 2 emissions by
2030.
Progress on Delivering our Strategy
Our vision for Tracsis is to become the leading provider of high value, niche
technology solutions and services that solve complex problems which maximise
efficiency in regulated industries. Our business model remains focused on
specialist offerings that have high barriers to entry, are sold on a recurring
basis under contract, and to a retained customer base that is largely blue
chip in nature. Our strategy to achieve this is focused on four areas as
outlined below. We believe this strategy will allow Tracsis to continue the
growth trajectory it has achieved since IPO in 2007 and to deliver further
significant value to shareholders in the short, medium and longer term.
We have made good progress in executing this growth strategy this year, which
leaves the Group well positioned to deliver further growth. Key progress
against the objectives for each of our four strategic priorities is summarised
in the table below:
Strategic Priority Progress in 2022 Future Focus
Drive Organic Growth · 24% organic revenue growth for the Group · Complete deployments of TRACS Enterprise contracts won in previous
years where development work is underway
Delivery of our pipeline, continual innovation of products and services, · Multi-year TRACS Enterprise contract wins with two UK passenger
flawless high quality delivery and an excellent close working relationship operators, and our first contract win in the rail freight sector · Secure further multi-year rail technology contracts across all
with our customers
product lines
· New smart ticketing contract won and implemented with a large
passenger Train Operating Company ("TOC"). Two new delay repay contracts also · Leverage RailComm to cross-sell existing Tracsis products and
secured and implemented with UK TOCs. services into North America
· Large multi-year Centrix software contract win in Remote Condition · Continued investment in software & technology product development
Monitoring and an extension to our long-running data logger framework contract
· Support UK Rail Industry to deliver the strategic vision outlined in
· Roll-out of RailHub enterprise software contract won in previous the Williams-Shapps plan
financial year progressing to plan and will more than double the user base to
c.40,000 individuals by late 2022
· First full deployment of TRACS Enterprise went live in summer 2022;
work continues on implementing other TRACS Enterprise contracts due to go-live
over the next 2 years
· Large pipeline of rail technology contract opportunities
· Strong post-Covid recovery of activities in Events and Traffic Data,
made possible by actions taken to safeguard these businesses during the
pandemic
Expand Addressable Markets · RailComm acquisition provides direct access to a significant number · Execute growth strategy for North America
of rail clients in the large and growing North American market
Selling our products and services into new markets, including overseas, and
· Continued growth in data informatics/GIS
expansion into selected sectors that share problems with the industries we · Secured new contract wins in both Icon GEO and RailComm post
currently serve acquisition · Targeted growth opportunities overseas or in adjacent markets
· Further growth from Compass Informatics
Enhance Growth Through Acquisition · Acquisition of RailComm providing direct access to North American · Active pursuit of M&A to extend rail software and technology
market footprint - focus on recurring revenue growth
Reinvesting Group profits to fund further accretive acquisitions that meet our
disciplined investment criteria · Expanded technology addressable market into Earth Observation through
Icon acquisition
· Further potential targets evaluated
Integration and Capability · Developed a comprehensive people strategy to attract, retain and · Execution of people strategy, including further development
develop talent programmes
Enhanced integration and collaboration across the Group, increasing management
capability and bandwidth, and improving our systems and processes, as key · Enhanced management capability and bandwidth with recruitment of · Complete IT transformation
foundations to deliver our growth strategy Group Managing Director
· Further R&D collaboration via Innovation Hub
· Launched 'OneTracsis' leadership training programme
· Implement ISO 14001 (Environmental management)
· Started workstream to implement a single groupwide IT operating model
· Continued alignment of groupwide systems and processes
· ESG strategy and targets agreed
· Developed Hopsta PAYG smart ticketing app through Innovation Hub
programme
· Icon GEO acquisition fully integrated
Trading Progress and Prospects
Rail Technology & Services
Summary segment results:
Revenue
£29.9m (2021: £26.4m)
Adjusted EBITDA* £9.8m (2021:
£9.1m)
Profit before Tax £4.8m
(2021: £5.0m)
Activity levels in our Rail Technology & Services Division remain high,
which has driven further revenue growth. All parts of the Division won new
contracts in the year, many of which went live with customers in the second
half of the year, and we have a strong pipeline of additional multi-year
software opportunities. Work has also continued on implementing contracts won
in previous years, including the first go-live of the end-to-end TRACS
Enterprise solution in summer 2022 and the ongoing roll-out of the large
RailHub enterprise software contract that was won in the previous financial
year and is due to be completed before the end of 2022.
Total revenue of £29.9m was 13% higher than prior year as a result of strong
organic growth in our Rail Operations & Planning and Customer Experience
businesses, as well as a good initial contribution from RailComm. Revenue in
both our Remote Condition Monitoring ("RCM") business and our safety and risk
management business (OnTrac) was lower than the record levels achieved in the
prior year, reflecting the typical investment cycle in RCM and the timing of a
large licence contribution in the prior year in OnTrac. Both businesses are
well positioned to deliver growth in the coming year.
As a result of the new contract wins and the deployment of contacts won in
previous years, annual recurring and routinely repeating revenue in the Rail
Technology & Services Division increased by 13% to £21.1m.
Adjusted EBITDA* increased by 8% to £9.8m (2021: £9.1m).
Profit before Tax decreased by £0.2m after £0.4m of transaction costs
related to the acquisition of RailComm (2021: £nil) and £0.4m increase in
the amortisation of acquired intangible assets.
The industry's transition to a new Great British Railways structure, which
aims to create a data-driven, customer-focused, safety-critical future for the
industry, is ongoing, and we have been asked at senior client level to
formally input our ideas into how the UK can achieve this vision. This
demonstrates the value the industry attaches to Tracsis' expertise and range
of rail technology products, which offer a compelling and, in some cases,
unique value proposition. Digital transformation will play a significant role
in the rail industry's transition and our range of products and services is
well placed to help the industry deliver operational performance improvements
and efficiency savings.
Rail Operations & Planning
Total revenues from the Group's rail operations & planning software and
hosting offerings grew by 17% to £12.7m (2021: £10.9m). This includes the
various revenue streams from our TRACS, ATTUne, COMPASS and Retail &
Operations product suites. We continue to benefit from high renewal rates from
existing customers. The strong revenue growth was mainly driven by new
multi-year TRACS Enterprise contracts won in the year, which were previously
announced and which we are currently implementing for our clients.
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 in this
sector are typically determined in partnership with our customers.
Work has also continued on implementing contracts won in previous years. The
first end-to-end implementation of all TRACS Enterprise modules went live with
a customer in the summer of 2022. We expect the second to be completed in
2023.
The TRACS Enterprise contract wins have also resulted in increased
contribution from Bellvedi, that was acquired in 2019. As a result the fair
value of contingent consideration payable in respect of this acquisition has
increased.
We have a strong pipeline of new multi-year TRACS Enterprise opportunities in
both the passenger and freight sectors of the industry.
Digital Railway & Infrastructure
Total revenues across the Digital Railway and Infrastructure offerings were
£13.3m (2021: £13.0m). This includes revenue from RailComm following its
acquisition in March 2022, as well as from Remote Condition Monitoring ("RCM")
within MPEC and from our RailHub safety and risk management product suites
within OnTrac. Both MPEC and OnTrac delivered record levels of revenue in the
prior year. Whilst these were not repeatable in FY 21/22 as anticipated,
reflecting the investment cycle of its UK customer base which consists of 5
year 'Control Periods', both businesses are well positioned for future growth
and the lower revenue was more than offset by a strong post-acquisition
performance from RailComm.
We saw lower RCM volumes in the first half of the year which was consistent
with the historic investment cycle trend of its UK customer base. Activity
levels increased in the second half of the year, and revenue over this period
was at a similar level to the second half of the prior financial year. Having
secured a large multi-year Centrix contract and the extension of our
long-running RCM data logger framework contract as previously announced, the
business is well placed to deliver growth moving forward.
OnTrac revenue was lower than the prior year which included a large, high
margin RailHub licence sale. Activity was dominated by the roll-out of this
product with our customer which has delivered implementation and support
revenue in the year. This has been proceeding according to plan and is
expected to be completed before the end of 2022, at which point the user base
for our RailHub product will have more than doubled to over 40,000
individuals. There is a growing pipeline of future opportunities for the
RailHub platform including additional functionality that is being developed by
Tracsis and the opportunity to host third party applications on the platform.
Post year end we have secured new orders for the next phase of development of
the RailHub product, and work on these is underway.
RailComm has delivered a strong revenue contribution for the period under
Tracsis ownership. This includes completion of some large project milestones
that were in the business' order book on acquisition. Implementation work is
underway on several other large rail technology projects, and since
acquisition the business has also won several new contracts in the North
American market that will support ongoing revenue and profit growth. RailComm
also opens up direct access into North America for Tracsis' existing portfolio
of rail products and services. We see RCM as the initial area of focus here,
and an experienced Tracsis managing director has relocated to the US to
oversee these growth opportunities.
Rail Customer Experience
There was very strong growth from our Customer Experience products, with
revenue increasing by 56% to £3.9m (2021: £2.5m). This was mainly driven by
the 'go-live' in H2 of the financial year of new contract wins that were
previously announced - one with a UK TOC for our Pay As You Go (PAYG) smart
ticketing solution, and two further delay repay contracts. This part of the
Group also benefitted from increased delay repay transaction volumes across
its existing customer base as rail passenger numbers recovered post Covid-19.
We are seeing increased interest in iBlocks' smart ticketing product offering
that is well aligned with passenger requirements and with the UK Government's
strategic intent to deliver increased PAYG, multi-modal ticketing as outlined
in the Williams-Shapps plan for Rail. Through our Innovation Hub R&D
incubator, iBlocks has developed a mobile app ("Hopsta") that puts this
technology directly in the hands of the consumer and avoids the requirement
for expensive gateline infrastructure. The first pilots of this product with
train operators are expected to start during financial year 22/23.
Data, Analytics, Consultancy & Events
Summary segment results:
Revenue
£38.8m (2021: £23.8m)
Adjusted EBITDA* £4.4m (2021:
£3.9m)
Profit before Tax £1.8m
(2021: £1.9m)
We have seen a significant recovery in activity levels in the Events and
Traffic Data businesses that were most impacted by Covid-19. As a result of
the actions taken during the pandemic to protect jobs, look after our people,
and safeguard these businesses, we have been able to respond quickly to this
increase in demand, and both businesses are currently operating at monthly run
rates close to pre-pandemic levels. In Events we benefitted from certain
activities that are not expected to repeat in the forthcoming financial year.
The Division has also benefitted from the incremental contribution from the
acquisitions of Flash Forward Consulting in February 2021 and Icon GEO in
November 2021 and both businesses have been fully integrated into the Group.
After excluding the growth from acquisition, organic revenue growth for the
Division was £12.1m (51%). This also included underlying growth in both
Compass Informatics and in Transport Insights.
Adjusted EBITDA increased by 12% to £4.4m (2021: £3.9m). The prior period
included £0.9m of support to the Income Statement from the Coronavirus Job
Retention Scheme ("CJRS"). We did not take any CJRS support in the financial
year ended 31 July 2022.
Data Analytics / GIS
Revenue increased to £7.9m (2021: £5.7m) which includes the incremental
contribution from Icon GEO as well as continued underlying growth in Compass
Informatics. Icon GEO has been fully integrated within this business to create
an Irish-based Data Analytics centre of excellence with c.130 staff
specialising in providing location-related technologies, earth observation and
analytics solutions to government and commercial organisations. The combined
business has secured additional contracts with government agencies in Ireland
based on the combined skillset and service offering it can now offer.
Transport Insights
Revenue of £5.2m was 49% higher than prior year (2021: £3.5m). After
adjusting for the year-on-year benefit from the acquisition of Flash Forward
Consulting in February 2021, this represents organic growth of c22% across the
expanded range of consulting and specialist services this business offers in
the transport space. We are seeing ongoing strong demand for our specialist
timetabling and rail performance expertise.
Traffic Data
Revenue increased by 29% to £9.9m (2021: £7.7m) with activity levels
steadily increasing as Covid-related restrictions were eased. The return of
some restrictions linked with the Omicron variant did present some headwinds
in the first half of the financial year, with work being postponed or
cancelled as the prevailing traffic conditions were not representative of
client needs. There has been a steady recovery of activity levels through the
second half of the financial year, and the final quarter was particularly
strong. The business is now operating at close to the monthly run-rate seen
pre-pandemic although some month-to-month variability in demand remains and
activity levels in this market are more sensitive to central and local
authority funding.
Event Transport Planning & Management
The Events business delivered a very strong performance, with record revenue
of £15.7m (2021: £6.9m). Activity levels in its market returned to
pre-pandemic levels very quickly, with high demand for sporting and music
events particularly in the final quarter of the financial year. We were able
to quickly respond to this increased in demand as a result of actions taken to
protect the business during the pandemic. We continued to support Covid
testing and vaccination centres which delivered c£1.4m revenue in the period
and is not expected to repeat.
Financial Summary
Group revenue of £68.7m was £18.5m (37%) higher than the prior year (2021:
£50.2m), reflecting strong organic and acquisitive growth. Revenue in the
Data, Analytics, Consultancy and Events Division increased by £15.0m (63%)
principally as a result of a strong post-Covid recovery in Events and Traffic
Data. There was also strong revenue growth in both our Transport Insights and
Data Analytics/GIS businesses, including the benefit from the acquisition of
Icon GEO in November 2021. Revenue in the Rail Technology and Services
Division was £3.5m (13%) higher than prior year, which includes strong
organic growth in our Rail Operations & Planning and Customer Experience
businesses as well as the benefit from the acquisition of RailComm in the
year.
Adjusted EBITDA* of £14.2m was £1.2m (9%) higher than prior year (2021:
£13.0m), which included £0.9m of support to the Income Statement from the
Coronavirus Job Retention Scheme ("CJRS"). No claims have been made under the
CJRS in this financial year. Excluding the CJRS benefit in the prior year,
adjusted EBITDA* increased by 17%. Adjusted EBITDA* margin of 20.6% was lower
than the prior year as anticipated (2021: 25.8%) reflecting the increased mix
of revenue from the post Covid recovery in Data, Analytics, Consultancy and
Events.
Statutory profit before tax of £2.6m is £2.0m lower than prior year (2021:
£4.6m) after £3.1m of exceptional items (FY21: £1.1m). These principally
reflect an increase in the fair value of contingent consideration following
strong underlying trading performance in Bellvedi (part of our Rail Operations
& Planning business), as well as transaction costs associated with
acquisitions made in the year.
In addition to the £1.2m increase in adjusted EBITDA* described above, the
movement in profit before tax reflects the following items:
· £1.8m depreciation charge at a similar level to the prior year
(2021: £1.6m);
· £5.0m amortisation of intangible assets (2021: £4.3m). The
increase versus prior year includes charges relating to the acquisitions of
Icon GEO in November 2021 and RailComm in March 2022, as well as a full year
charge from the acquisition of Flash Forward Consulting in February 2021;
· £1.5m share based payment charges (2021: £1.3m);
· £3.1m exceptional items (2021: £1.1m) representing: a net
£1.8m increase in the assessed fair value of contingent consideration based
on the future expectations of performance from previous acquisitions (2021:
£0.3m) which principally relates to the expected performance from Bellvedi in
the final year of its earnout; £0.8m unwinding of previously discounted
contingent consideration balances in accordance with IFRS accounting standards
(2021: £0.7m); £0.6m of transaction costs associated with the acquisitions
of Icon GEO (£0.2m) and RailComm (£0.4m) (2021: £0.1m relating to the
acquisition of Flash Forward Consulting); and £0.1m impairment charge
relating to an equity accounted investee (2021: £nil); partly offset by
£0.2m credit relating to the fair value adjustment and subsequent gain on
settlement of a financial liability (2021: £nil);
· £0.1m net finance expense (2021: £0.1m); and
· £0.6m charge (2021: £0.4m) relating to the share of the result
of equity accounted investees
Adjusted diluted earnings per share increased by 4% to 32.3 pence (2021: 30.9
pence). Statutory diluted earnings per share was 5.0 pence (2021: 7.8 pence).
Cash Generation
The Group continues to have significant levels of cash and remains debt free.
At 31 July 2022 the Group's cash balances, including balances held in escrow,
were £17.2m (2021: £25.4m). Cash generation remains strong.
Cash generated from operations was £9.5m (2021: £10.8m) after a net £4.0m
increase in working capital (2021: £2.0m increase). This reflects normal
trading patterns and includes an increase in trade receivables in the final
trading months of the year following the strong post-Covid recovery in Events
and Traffic Data. The Group has not had any material bad debt incidences.
There was £0.6m cash outflow on transaction costs for acquisitions completed
in the year (2021: £0.1m). Adjusted EBITDA* includes £0.1m profit on
disposal of plant and equipment (2021: <£0.1m).
Net capital expenditure increased to £1.0m (2021: £0.3m) which principally
reflects the post-Covid recovery in activity levels in Events and Traffic
Data, as well as investment in IT assets. Net lease liability payments of
£1.4m were £0.2m higher than prior year (2021: £1.2m) which includes the
effect of acquisitions. Tax paid of £1.3m was at a similar level to the prior
year (2021: £1.4m),
As a result free cash flow* was £5.8m (2021: £7.8m)
Free Cash Flow*
Year Year
Ended ended
31 July 31 July
2022 2021
£'m £'m
Adjusted EBITDA * 14.2 13.0
Changes in working capital (4.0) (2.0)
Other adjustments((1)) (0.7) (0.2)
Cash generated from operations 9.5 10.8
Purchase of plant and equipment (net of proceeds from disposal) (1.0) (0.3)
Lease liability payments (net of lease receivable receipts) (1.4) (1.2)
Tax paid (1.3) (1.4)
Other((2)) - (0.1)
Free Cash Flow* 5.8 7.8
(*) Net cash flow from operating activities after purchase of plant and
equipment, proceeds from disposal of plant and equipment, proceeds from
exercise of share options, lease liability payments, and lease liability
receipts
((1)) Includes cash outflows on exceptional items (see note 9) and profit on
disposal of plant & equipment
((2)) Includes net interest received or paid and proceeds from exercise of
share options
The Group invested £9.1m in the acquisitions of Icon GEO and RailComm, net of
cash acquired (2021: (£0.1m)) and there was a further outflow of £0.3m
relating to deferred consideration for the prior year acquisition of Flash
Forward Consulting (2021: nil). Cash payments of £4.1m (2021: £0.4m) were
made in the year relating to contingent consideration on the previous
acquisitions of: Bellvedi, part of Rail Operations & Planning, £3.5m;
Cash & Traffic Management Limited, part of Events, £0.3m; and Compass
Informatics Limited, part of Data Analytics/GIS, £0.3m. £0.4m was paid to
repurchase "A" shares in Tracsis Rail Consultancy, as described below (2021:
nil). Dividends paid to shareholders were £0.3m (2021: nil) and there was a
£0.2m favourable impact from foreign exchange (2021: £0.1m adverse).
As a result, total cash balances decreased by £8.2m to £17.2m. £2.2m of
this is held in escrow following the acquisition of RailComm and will be
payable during the year ending 31 July 2023 to satisfy any contingent
consideration associated with this acquisition.
Acquisitions & Other Corporate Activity
Icon GEO
On 3 November 2021 the Group acquired The Icon Group Limited ("Icon GEO").
Headquartered in Dublin, Icon GEO is an interdisciplinary geosciences business
specialising in earth observation, geographical information systems, and
spatial data analytics. The acquisition consideration comprised an initial
cash payment of €2.2m (£1.9m) which was funded out of Tracsis cash
reserves, a further cash payment to reflect the working capital position of
the business (above a working capital hurdle) on completion totalling €2.2m
(£1.9m) and the issue of 68,762 new ordinary shares in Tracsis plc to a value
of €0.8m (£0.6m). Additional contingent consideration of up to €1.8m
(£1.5m) is payable subject to Icon GEO achieving certain stretched financial
targets in the three years post acquisition.
RailComm LLC & RailComm Associates Inc
The Group acquired RailComm LLC and its wholly owned subsidiary RailComm
Associates Inc (together "RailComm") on 11 March 2022. Headquartered in
Fairport, New York and established in 1999, RailComm provides mission critical
automation and control solutions that reduce costs, increase safety, and
improve operational efficiency for rail passenger/freight operators and rail
served ports/industrials. The acquisition consideration comprised an initial
cash payment of $11.5m (£8.8m) which was funded out of Tracsis cash reserves.
Additional contingent consideration of up to $2.7m (£2.2m) is payable subject
to RailComm achieving certain financial targets in the first full year post
acquisition through to 31 March 2023. This cash is being held in escrow
through that period.
Tracsis Rail Consultancy
In the previous financial year the Group acquired Flash Forward Consulting
Limited. As part of the transaction the sellers were allotted 10,225 "A"
shares in Tracsis Rail Consultancy Limited. 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 fair value of this liability at 31 July 2021 was assessed as
£590,000. On 17 June 2022 the Group acquired all of these "A" shares in
return for a cash payment of £416,000. The fair value of the "A" shares at
this date was £463,000. A fair value adjustment of £127,000 and a gain on
purchase of £47,000 have been recognised in exceptional items in the year.
Dividend
The Group remains committed to the progressive dividend policy that was
adopted in 2012. In the financial year ended 31 July 2022, we have seen a
strong recovery in activity levels in those parts of the Group most impacted
by Covid-19, and we did not utilise the UK Government's CJRS scheme. In this
context the Board has recommended a final divided of 1.1 pence per share. The
final dividend, subject to shareholder approval at the forthcoming Annual
General Meeting, will be paid on 10 February 2023 to shareholders on the
register at the close of business on 27 January 2023. This will bring the
total dividend for the year to 2.0 pence per share.
Board
Jill Easterbrook was appointed to the Board as a Non-Executive Director on 5
October 2022. Lisa Charles-Jones will step down from the Board on 31 December
2022 after six years with the Group. Lisa will be succeeded as Chair of the
Remuneration Committee by Jill Easterbrook at this date.
Outlook
Our end market drivers are strong and Tracsis' products and services are well
aligned with these drivers. We deliver positive benefit cases to our clients
by enabling them 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 are making good progress in implementing this
strategy, including winning new multi-year software contracts, and continuing
to deliver on contracts won in previous years. We recognise the need to
continue to integrate the Group's activities, technologies and operating model
in order to provide a solid platform for ongoing scalable growth. We have made
good progress in the year and will continue to invest in this area.
M&A remains a core part of our strategy and we have taken an important
step in the year with our first acquisition in North America. This further
increases our addressable markets and diversifies our growth opportunities. We
will continue to actively pursue further M&A opportunities, with a focus
on extending our software and technology footprint and enhancing recurring
revenue growth.
Q1 trading has been in line with the Board's expectations and the Group
remains well positioned to deliver further growth in the coming financial year
and beyond.
Chris Cole Chris Barnes
Non-Executive Chairman Chief Executive Officer
8 November 2022
Consolidated Statement of Comprehensive Income for the year ended 31 July 2022
2022 2021
Group excluding in-year acquisitions Acquisitions in-year Total Total
Notes £000 £000 £000 £000
Revenue 3 63,380 5,343 68,723 50,237
Cost of sales (25,246) (1,237) (26,483) (15,424)
Gross profit 38,134 4,106 42,240 34,813
Administrative costs (34,649) (4,336) (38,985) (29,657)
Adjusted EBITDA* 3,6 13,018 1,143 14,161 12,978
Depreciation (1,700) (67) (1,767) (1,603)
Adjusted profit ** 6 11,318 1,076 12,394 11,375
Amortisation of intangible assets (4,253) (747) (5,000) (4,269)
Other operating income 426 - 426 440
Share-based payment charges (1,502) - (1,502) (1,276)
5,989 329 6,318 6,270
Operating profit before exceptional items
Exceptional items: 9
Impairment losses (49) - (49) -
Other (2,455) (559) (3,014) (1,114)
Operating profit/(loss) 3,485 (230) 3,255 5,156
Net finance expense (132) (9) (141) (87)
Share of result of equity accounted investees (556) - (556) (434)
Profit/(loss) before tax 3 2,797 (239) 2,558 4,635
Taxation (987) (69) (1,056) (2,279)
Profit/(loss) after tax 1,810 (308) 1,502 2,356
Other comprehensive (expense)/income
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation differences 423 - 423 (126)
Items not to be reclassified to profit and loss in subsequent period
Revaluation of financial assets (50) - (50) -
Total comprehensive income/(expense) for the year 2,183 (308) 1,875 2,230
Earnings per Ordinary Share
Basic 4 5.09p 8.06p
Diluted 4 4.95p 7.82p
* Earnings before net finance expense, tax, depreciation, amortisation,
exceptional items, other operating income, share-based payment charges and
share of result of equity accounted investees - see note 6
** Earnings before net finance expense, tax, amortisation, exceptional items,
other operating income, share-based payment charges and share of result of
equity accounted investees - see note 6
Consolidated Balance Sheet as at 31 July 2022
2022 2021
Note £000 £000
Non-current assets
Property, plant and equipment 4,897 3,540
Intangible assets 65,867 51,745
Investments - equity - 50
Investments in equity accounted investees - 605
Deferred tax assets 410 551
71,174 56,491
Current assets
Inventories 1,090 381
Trade and other receivables 18,454 11,263
Cash held in escrow 2,217 -
Cash and cash equivalents 14,970 25,387
36,731 37,031
Total assets 107,905 93,522
Non-current liabilities
Lease liabilities 1,476 1,131
Contingent consideration payable 8 736 3,220
Deferred consideration payable 8 297 584
Deferred tax liabilities 10,671 8,517
13,180 13,452
Current liabilities
Lease liabilities 1,291 928
Trade and other payables 24,092 17,007
Contingent consideration payable 8 8,585 4,689
Deferred consideration payable 8 308 308
Current tax liabilities - 473
34,276 23,405
Total liabilities 47,456 36,857
Net assets 60,449 56,665
Equity attributable to equity holders of the company
Called up share capital 119 117
Share premium reserve 6,436 6,401
Merger reserve 6,161 5,525
Retained earnings 47,448 44,710
Translation reserve 335 (88)
Fair value reserve (50) -
Total equity 60,449 56,665
Consolidated Statement of Changes in Equity
Share Capital Share Premium Merger Reserve Retained Earnings Translation Reserve Fair Value Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
£'000
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
At 1 August 2021 117 6,401 5,525 44,710 (88) - 56,665
Profit for the year - - - 1,502 - - 1,502
Other comprehensive income - - - - 423 (50) 373
Total comprehensive income - - - 1,502 423 (50) 1,875
Transactions with owners:
Dividends - - - (266) - - (266)
Share based payment charges - - - 1,502 - - 1,502
Exercise of share options 2 35 - - - - 37
Shares issued as consideration for business combinations - - 636 - - - 636
At 31 July 2022 119 6,436 6,161 47,448 335 (50) 60,449
Consolidated Cash Flow Statement for the year ended 31 July 2022
2022 2021
Notes £000 £000
Operating activities
Profit for the year 1,502 2,356
Net finance expense 141 87
Depreciation 1,767 1,603
Profit on disposal of plant and equipment (70) (46)
Non cash exceptional items 2,441 985
Other operating income (426) (440)
Amortisation of intangible assets 5,000 4,269
Share of result of equity accounted investees 556 434
Income tax charge 1,056 2,279
Share based payment charges 1,502 1,276
Operating cash inflow before changes in working capital 13,469 12,803
Movement in inventories (233) 49
Movement in trade and other receivables (4,103) (4,796)
Movement in trade and other payables 383 2,784
Cash generated from operations 9,516 10,840
Interest received 6 7
Interest paid - (74)
Income tax paid (1,334) (1,417)
Net cash flow from operating activities 8,188 9,356
Investing activities
Purchase of plant and equipment (1,129) (400)
Proceeds from disposal of plant and equipment 123 88
Acquisition of subsidiaries (net of cash acquired) 7 (9,097) 127
Payment of contingent consideration 8 (4,126) (410)
Cash held in escrow for payment of contingent consideration (2,217) -
Payment of deferred consideration 8 (315) -
Net cash flow used in investing activities (16,761) (595)
Financing activities
Dividends paid 5 (266) -
Proceeds from exercise of share options 37 27
Settlement of financial liability (416) -
Lease liability payments (1,421) (1,260)
Lease receivable receipts 32 32
Net cash flow used in financing activities (2,034) (1,201)
Net (decrease)/increase in cash and cash equivalents (10,607) 7,560
Exchange adjustments 190 (93)
Cash and cash equivalents at the beginning of the year 25,387 17,920
Cash and cash equivalents at the end of the year 14,970 25,387
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 2022 or the year ended 31 July
2021 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
2022 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 2021 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 UK adopted international accounting standards ("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) 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. 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 ongoing 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 financial statements have been prepared and approved by the
directors in accordance with UK adopted international accounting standards
("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 2022 the
Group had net cash and cash equivalents totalling £15.0m, with a further
£2.2m held in an escrow account for settlement of contingent consideration
relating to the Railcomm acquisition. The Board has prepared cash flow
forecasts for the period through to December 2023 based upon assumptions for
trading and the requirements for cash resources, these forecasts take into
account reasonably possible changes in trading financial performance.
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:
2022 2021
£000 £000
Rail Technology & Services 29,935 26,424
Data, Analytics, Consultancy & Events 38,788 23,813
Total revenue 68,723 50,237
Revenue can also be analysed as follows:
2022 2021
£000 £000
Software and related services 22,088 20,980
Data, Analytics, Consultancy, and Events 38,788 23,813
Other 7,847 5,444
Total 68,723 50,237
Major customers
Transactions with the Group's largest customer represent 12% of the Group's
total revenues (2021: 17%).
Geographic split of revenue
A geographical analysis of revenue is provided below:
2022 2021
£000 £000
United Kingdom 55,849 43,965
Ireland 8,827 5,449
Rest of Europe 280 338
North America 3,343 189
Rest of the World 424 296
Total 68,723 50,237
b) Segmental Analysis
The Group has divided its results into two segments being 'Rail Technology
& Services' and 'Data, Analytics, Consultancy & Events' consistent
with disclosure in the 2021 Financial Statements.
The Group has a wide range of products and services for the rail industry,
such as software, hosting services, 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. Presented below
segmental analysis of profit before tax for 2021 has been further analysed to
allocate amortisation and exceptional items, assets and liabilities for 2021
has been further analysed to allocate Intangibles & Investments,
Contingent Consideration and Deferred Consideration to each individual
segment.
2022
Rail Technology & Services
Data, Analytics, Consultancy & Events
Unallocated Total
£000 £000 £000 £000
Revenues
Total revenue for reportable segments 29,935 38,788 - 68,723
Consolidated revenue 29,935 38,788 - 68,723
Profit or loss
EBITDA for reportable segments 9,780 4,381 - 14,161
Amortisation of intangible assets (3,731) (1,269) - (5,000)
Depreciation (748) (1,019) - (1,767)
Exceptional items (net) (444) (176) (2,443) (3,063)
Other operating income - - 426 426
Share-based payment charges - - (1,502) (1,502)
Interest payable (net) (46) (68) (27) (141)
Share of result of equity accounted investees - - (556) (556)
Consolidated profit before tax 4,811 1,849 (4,102) 2,558
2021
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated Total
£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 (3,345) (924) - (4,269)
Depreciation (699) (904) - (1,603)
Exceptional items (net) - (129) (985) (1,114)
Other operating income - - 440 440
Share-based payment charges - - (1,276) (1,276)
Interest payable (net) (36) (37) (14) (87)
Share of result of equity accounted investees - - (434) (434)
Consolidated profit before tax 4,979 1,925 (2,269) 4,635
2022
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated Total
£'000 £000 £000 £000
Assets
Total other assets for reportable segments 10,935 13,506 - 24,441
Intangible assets and investments 54,277 11,590 - 65,867
Deferred tax assets - - 410 410
Cash held in escrow 2,217 - - 2,217
Cash and cash equivalents 8,918 6,052 - 14,970
Consolidated total assets 76,347 31,148 410 107,905
Liabilities
Total other liabilities for reportable segments (17,070) (9,789) - (26,859)
Deferred tax liabilities - - (10,671) (10,671)
Contingent consideration (8,320) (1,001) - (9,321)
Deferred consideration - (605) - (605)
Consolidated total liabilities (25,390) (11,395) (10,671) (47,456)
2021
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated Total
£'000 £000 £000 £000
Assets
Total other assets for reportable segments 6,515 8,669 - 15,184
Intangible assets and investments 42,171 9,574 655 52,400
Deferred tax assets - - 551 551
Cash and cash equivalents 16,862 6,483 2,042 25,387
Consolidated total assets 65,548 24,726 3,248 93,522
Liabilities
Total other liabilities for reportable segments (11,913) (7,036) (590) (19,539)
Deferred tax - - (8,517) (8,517)
Contingent consideration (7,194) (715) - (7,909)
Deferred consideration - (892) - (892)
Consolidated total liabilities (19,107) (8,643) (9,107) (36,857)
4 Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 July 2022 was based on the
profit attributable to ordinary shareholders of £1,502,000 (2021:
£2,356,000) and a weighted average number of ordinary shares in issue of
29,486,000 (2021: 29,229,000), calculated as follows:
Weighted average number of ordinary shares
In thousands of shares
2022 2021
Issued ordinary shares at 1 August 29,332 29,122
Effect of shares issued related to business combinations 51 7
Effect of shares issued for cash 103 100
Weighted average number of shares at 31 July 29,486 29,229
Diluted earnings per share
The calculation of diluted earnings per share at 31 July 2022 was based on
profit attributable to ordinary shareholders of £1,502,000 (2021:
£2,356,000) and a weighted average number of ordinary shares in issue after
adjustment for the effects of all dilutive potential ordinary shares of
30,330,000 (2021: 30,131,000).
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 enable a comparison to
similar businesses and are metrics used by Equities Analysts who cover the
Group. Amortisation and share based payment charges are deemed to be 'non-cash
at the point of recognition' in nature, and exceptional items by their very
nature are one-off, 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.
2022 2021
£'000 £'000
Profit after tax 1,502 2,356
Amortisation of intangible assets 5,000 4,269
Share-based payment charges 1,502 1,276
Exceptional items (net) 3,063 1,114
Other operating income (426) (440)
Tax impact of adjusting items (847) 746
Adjusted profit for EPS purposes 9,794 9,321
Weighted average number of ordinary shares
In thousands of shares
For the purposes of calculating Basic earnings per share 29,486 29,229
Adjustment for the effects of all dilutive potential ordinary shares 844 902
For the purposes of calculating Dilutive earnings per share 30,330 30,131
Basic adjusted earnings per share 33.22p 31.89p
Diluted adjusted earnings per share 32.29p 30.93p
5 Dividends
The Group did not pay an interim or final dividend in financial year 2019/20
or 2020/21. The Group is committed to a progressive dividend policy, and an
interim dividend for financial year 2021/22 has been paid. The cash cost of
the dividend payments is below:
2022 2021
£000 £000
Interim dividend for 2021/22 266 -
Total dividends paid 266 -
The dividends paid or proposed in respect of each financial year is as
follows:
2022 2021
£000 £000
Interim dividend for 2020/21 of 0.0p per share paid - -
Final dividend for 2020/21 of 0.0p per share paid - -
Interim dividend for 2021/22 of 0.9p per share paid 266 -
Final dividend for 2021/22 of 1.1p per share proposed 327 -
The total dividends paid or proposed in respect of each financial year ended
31 July is as follows:
2022 2021 2020 2019 2018 2017 2016 2015 2014
Total dividends paid per share 2.0 Nil Nil 1.8p 1.6p 1.4p 1.2p 1.0p 0.8p
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 adjust for
certain items which impact upon IFRS measures, to aid the user in
understanding the activity taking place across the Group's businesses. 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 net finance expense, 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:
2022 2021
£000 £000
Profit before tax 2,558 4,635
Finance expense - net 141 87
Share-based payment charges 1,502 1,276
Exceptional items - net 3,063 1,114
Other operating income (426) (440)
Amortisation of intangible assets 5,000 4,269
Depreciation 1,767 1,603
Share of result of equity accounted investees 556 434
Adjusted EBITDA 14,161 12,978
Adjusted Profit
Calculated as Earnings before net finance expense, 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:
2022 2021
£000 £000
Profit before tax 2,558 4,635
Finance expense - net 141 87
Share-based payment charges 1,502 1,276
Exceptional items - net 3,063 1,114
Other operating income (426) (440)
Amortisation of intangible assets 5,000 4,269
Share of result of equity accounted investees 556 434
Adjusted profit 12,394 11,375
Adjusted EBITDA reconciles to adjusted profit as set out below:
2022 2021
£000 £000
Adjusted EBITDA 14,161 12,978
Depreciation (1,767) (1,603)
Adjusted profit 12,394 11,375
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".
Free Cash Flow
Calculated as net cash flow from operating activities after purchase of plant
and equipment, proceeds from disposal of plant and equipment, proceeds from
exercise of share options, lease liability payments, and lease liability
receipts. This measure reflects the cash generated in the period that is
available to invest in accordance with the Group's growth strategy and capital
allocation policy.
Free cash flow reconciles to net cash flow from operating activities as set
out below:
2022 2021
£000 £000
Net cash flow from operating activities 8,188 9,356
Purchase of plant and equipment (1,129) (400)
Proceeds from disposal of plant and equipment 123 88
Proceeds from exercise of share options 37 27
Lease liability payments (1,421) (1,260)
Lease receivable receipts 32 32
Free Cash Flow 5,830 7,843
7 Acquisitions and investments in the current year
(a) The Icon Group Limited ("Icon")
On 3 November 2021 the Group acquired the entire issued share capital of The
Icon Group Limited ("Icon"). Icon is an Ireland based interdisciplinary
geoscience company specialising in Earth Observation (EO), Geographical
Information System (GIS) and spatial data analytics. Icon has several
long-term repeat contracts. The acquisition of Icon Group adds EO capabilities
that enhance the Group's offering in this growing market. Icon has a customer
base that is complementary to Tracsis'.
The acquisition consideration comprised an initial cash payment of €2.2m
(£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 €0.8m (£0.6m). An additional
payment of approximately €2.2m (£1.9m) reflects the net current asset
(above a working capital hurdle) position at completion on a euro for euro
basis. Additional contingent consideration of up to €1.8m (£1.5m) is
payable subject to Icon Group achieving certain stretched financial targets in
the three years post acquisition.
The business is cash generative and debt free. In the period from acquisition
to 31 July 2022 The Icon Group Limited contributed revenue to the Group of
£2.0m and pre-tax profit of £0.3m, before amortisation of associated
intangible assets and exceptional deal costs (pre tax loss £0.2m including
amortisation of associated intangible assets and exceptional deal costs). If
the acquisition had occurred on 1 August 2021 management estimates that the
contribution to Group revenue would have been £2.7m and Group pre-tax profit
for the period of £0.4m (estimated pre tax loss £0.2m including amortisation
of associated intangible assets and exceptional deal costs if the acquisition
had occurred on 1 August 2021).
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, including the skills and experience of staff within the acquired
business and anticipated synergies arising from the acquisition, 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. Due to the nature of the company
acquired, this often requires the recognition of additional intangible assets,
specifically in relation to customer relationships. An external valuation
specialist has been engaged by the Group to assist with the valuation of the
intangibles. In determining the fair values of intangible assets, at 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 £0.2m which are included within administrative expenses.
The acquisition had the following effect on the Group's assets and liabilities
on the acquisition date:
Recognised Recognised
Pre-acquisition Fair value value on Value on
carrying amount adjustments acquisition acquisition
€000 €000 €000 £000
Intangible assets: Customer related intangibles - 2,367 2,367 2,014
Tangible fixed assets 15 - 15 13
Cash and cash equivalents 2,069 - 2,069 1,760
Trade and other receivables 1,037 - 1,037 882
Trade and other payables (493) - (493) (419)
Deferred tax liability - (296) (296) (252)
Net identified assets and liabilities 2,628 2,071 4,699 3,998
Goodwill on acquisition 1,537 1,308
6,236 5,306
Consideration paid in cash 4,484 3,820
Consideration paid: fair value of shares issued 750 636
Fair value of contingent consideration payable 1,002 850
Total consideration 6,236 5,306
(b) Railcomm LLC & Railcomm Associates Inc
On 11 March 2022 the Group acquired the entire members interests of Railcomm
LLC and its wholly owned subsidiary Railcomm Associates Inc (together
"Railcomm"). Railcomm is a US based company providing mission critical
automation and control solutions that reduce costs, increase safety, and
improve operational efficiency for rail passenger/freight operators and rail
served ports/industrials. Its two core products are rail yard automation and
computer aided dispatching and it has a wide and diversified client base
across the North American market. The acquisition is in line with Tracsis'
strategy of extending its rail software footprint and expanding the
addressable markets for its products and services.
The acquisition consideration comprised an initial cash payment of $11.5m
(£8.8m) which was funded out of Tracsis cash reserves. Additional contingent
consideration of up to $2.7m (£2.1m) is payable subject to Railcomm
delivering certain financial targets in the first full year after acquisition
through to 31 March 2023. A further $0.1m (£0.1m) post completion adjustment
in accordance with the purchase agreement was due to the sellers following
completion.
The business was acquired on a debt free basis. In the period from acquisition
to 31 July 2022 Railcomm contributed revenue to the Group of £3.3m and
pre-tax profit of £0.8m, before amortisation of associated intangible assets
and exceptional deal costs (pre tax loss £0.1m including amortisation of
associated intangible assets and exceptional deal costs). If the acquisition
had occurred on 1 August 2021 management estimates that the contribution to
Group revenue would have been £8.9m and Group pre-tax profit for the period
of £2.0m (estimated pre-tax profit £0.7m including amortisation of
associated intangible assets and exceptional deal costs if the acquisition had
occurred on 1 August 2021). 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, including the skills and experience of staff within the acquired
business, and anticipated synergies arising from the acquisition, 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. Due to the nature of the companies
acquired, this often requires the recognition of additional intangible assets,
specifically in relation to technology, customer relationships, order backlog
and marketing. An external valuation specialist has been engaged by the Group
to assist with the valuation of the intangibles In determining the fair values
of intangible assets, the Group has used discounted cash flow forecasts. The
Group incurred acquisition related costs of £0.4m which are included within
administrative expenses.
The acquisition had the following effect on the Group's assets and liabilities
on the acquisition date:
Recognised Recognised
Pre-acquisition Fair value value on value on
carrying amount adjustments acquisition acquisition
$000 $000 $000 £000
Intangible assets: Technology intangibles - 7,398 7,398 5,654
Intangible assets: Customer related intangibles - 1,481 1,481 1,132
Intangible assets: Order backlog intangible - 501 501 383
Intangible assets: Marketing related intangibles - 1,082 1,082 827
Tangible fixed assets 345 - 345 264
Cash and cash equivalents 2,257 - 2,257 1,725
Trade and other receivables 2,687 - 2,687 2,053
Inventory 576 - 576 440
Trade and other payables (2,837) - (2,837) (2,168)
Contract liabilities (5,302) - (5,302) (4,052)
Deferred tax liability - (2,825) (2,825) (2,159)
Net identified assets and liabilities (2,274) 7,637 5,363 4,099
Goodwill on acquisition 8,841 6,756
14,204 10,855
Consideration paid in cash 11,610 8,873
Fair value of contingent consideration payable 2,594 1,982
Total consideration 14,204 10,855
8 Contingent and deferred consideration
a Contingent consideration
During this financial year the Group acquired The Icon Group Limited ("Icon")
and Railcomm, LLC and Railcomm Associates Inc (together "Railcomm"). Under the
share purchase agreement in place for Icon, contingent consideration is
payable which is based on the profitability of Icon in the 3 year period after
the acquisition, and on the successful renewal of certain key contracts.
Contingent consideration is payable in Euros up to a maximum of €1,750,000
(£1,471,000), and the fair value of the amount payable was assessed as
€902,000 (£757,000). Contingent consideration under the share purchase
agreement for Railcomm is payable up to a maximum of $2,700,000 (£2,217,000)
linked to the financial performance of the business in the year following the
acquisition through to 31 March 2023. At the year- end date the fair value of
the amount payable was assessed at $2,626,000 (£2,157,000). Cash held in
escrow for the purpose of settlement of the contingent consideration for the
Railcomm acquisition totalled £2,217,000 at the balance sheet date. The cash
held in escrow is held as a financial asset not within the overall cash and
cash equivalents balance, due to restrictions on access to the cash on demand.
Prior approval of any transfers must be completed by both Tracsis and the
seller before they can take place, and as such the cash is not considered to
be available on demand. If the financial performance metrics linked to the
contingent consideration are not met in full, the balance will be returned to
Tracsis.
In 2020, 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 £2,224,000 at the year -end date.
In 2019, the Group acquired 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 over the contingent consideration period is €1,500,000 (£1,261,000)
for Compass Informatics Limited and £7,900,000 for Bellvedi Limited. The fair
value of the amount payable was assessed at £243,000 for Compass Informatics
Limited and £3,940,000 for Bellvedi Limited at the year-end date.
During the financial year, the final contingent consideration due on the 2019
acquisition of Cash & Traffic Management Limited was paid totalling
£259,000 (2021: £nil). Contingent consideration of €329,000 (£281,000)
was paid in respect of the Compass Informatics Limited acquisition (2021:
£410,000) and £3,586,000 in respect of the Bellvedi Limited acquisition
(2021: £nil).
As detailed in note 9, a net exceptional charge of £1,792,000 was recognised,
following a review of the assumptions of the fair value of the contingent
consideration as at 31 July 2022. At the balance sheet date, the Directors
assessed the fair value of the remaining amounts payable which were deemed to
be as follows.
2022 2021
£000 £000
Cash & Travel Management Limited - 253
Compass Informatics Limited 243 462
Bellvedi Limited 3,940 4,357
iBlocks Limited 2,224 2,837
The Icon Group Limited 757 -
Railcomm, LLC 2,157 -
9,321 7,909
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. In respect of Compass Informatics Limited, Bellvedi Limited, iBlocks
Limited, The Icon Group, and Railcomm a change in the estimated profit of 10%
would result in a change in the fair value of contingent consideration of
£1.0m.
The movement on contingent consideration can be summarised as follows:
2022 2021
£000 £000
At the start of the year 7,909 7,334
Arising on acquisition (note 7) 2,832 -
Cash payment (4,126) (410)
Fair value adjustment to Statement of Comprehensive Income 1,792 327
Unwind of discounting 774 658
Exchange adjustment 140 -
At the end of the year 9,321 7,909
The ageing profile of the remaining liabilities can be summarised as follows:
2022 2021
£000 £000
Payable in less than one year 8,585 4,689
Payable in more than one year 736 3,220
Total 9,321 7,909
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 2022 the
present value of this deferred consideration is £605,000. The movement on
deferred consideration can be summarised as follows:
2022 2021
£000 £000
At the start of the year 892 -
Arising on acquisition - 878
Cash payment (315) -
Unwind of discounting 28 14
At the end of the year 605 892
The ageing profile of the remaining liabilities can be summarised as follows:
2022 2021
£000 £000
Payable in less than one year 308 308
Payable in more than one year 297 584
Total 605 892
9 Exceptional items:
The Group incurred a number of exceptional items in 2022 and 2021 which are
analysed as follows:
2022 2021
£000 £000
Impairment losses
Non cash:
Investment in Associate 49 -
Total impairment losses 49 -
Other
Non cash:
Contingent consideration fair value adjustment 1,792 327
Unwind of discounting of contingent consideration 774 658
Fair value adjustment - Financial Liability (127) -
Gain on settlement of Financial liability (47) -
Cash:
Legal and professional fees in respect of acquisitions and other corporate 622 129
activities
Total other 3,014 1,114
Total exceptional items 3,063 1,114
2022 2021
Split £000 £000
Non cash 2,441 985
Cash 622 129
Total 3,063 1,114
2022
An exceptional cost has been recognised to increase the fair value of the
contingent consideration payable at the end of the financial year. A
£1,792,000 charge to the income statement has been recorded which reflects
the increased pipeline for software contract opportunities, and the impact of
software contracts which have been secured in the financial year. A further
charge totalling £774,000 has been recognised which reflects the unwinding of
the discounting of contingent consideration. The discount rates applied vary
by acquisition and are in the range of 3.25% to 14.5%. 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. On 17
June 2022 the Group acquired the minority shareholding of 10,225 TRC A Shares
which were issued as part of the consideration on the acquisition of Flash
Forward Consulting in February 2021. The fair value was determined on
acquisition as £590,000 and was recognised as a financial liability in the
Statement of Financial Position held at Fair Value through Profit and Loss.
The fair value of these shares was assessed as £463,000 immediately prior to
the re-purchase and a resulting fair value adjustment recognised of £127,000.
Consideration for the shares paid was £416,000 and a resulting one-off gain
has been recognised totalling £47,000.
During 2022 the Group made two acquisitions. In November 2021 the Group
acquired The Icon Group Limited. Legal and professional fees related to this
acquisition totalled £167,000. In March 2022 the Group acquired Railcomm LLC
incurring acquisition related fees of £392,000. As part of the acquisition
the Group incurred £40,000 (2021: £nil) of legal and professional costs
associated with the transfer of a UK employee to oversee the integration of
the acquisition.
Legal and professional fees have also been incurred in relation to one off
transactions (including the re-purchase of TRC A Shares) and as they will not
recur in future years, are deemed to be exceptional in nature.
An impairment loss of £49,000 has been recognised in the year in relation to
the Investment in the Associate in Nutshell Software Limited. Following an
assessment of the anticipated future cash flows anticipated from the
investment a judgement was taken to write down the remaining carrying value to
£nil.
2021
In the previous financial year, 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 was also recognised 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%.
10 Subsequent Events
On 5 October 2022 Jill Easterbrook was appointed to the Board as a
non-executive director. Jill joined the Audit, Remuneration and Nomination
Committees with immediate effect. On the same date it was also announced that
Lisa Charles-Jones intends to resign from the Board from 31 December 2022 and
Jill will assume Chair of the Remuneration Committee at this date
11 Annual Report and Annual General Meeting
The Company anticipates dispatching a copy of its annual report and accounts
to all shareholders in December 2022. A copy will also be available on the
Company's website: www.tracsis.com. The Annual General Meeting of the Company
will be held at Nexus, Discovery Way, Leeds, LS2 3AA on 18 January 2023 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 EVLFBLFLXFBFRecent 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