REG - Tracsis PLC - Final Results
15/11/2023 07:00
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RNS Number : 4557T Tracsis PLC 15 November 2023
Tracsis plc
('Tracsis', 'the Company' or 'the Group')
Audited results for the year ended 31 July 2023
Tracsis, a leading transport technology provider, is pleased to announce its
audited final results for the year ended 31 July 2023.
Financial Results (£'m) 2023 2022
Revenue 82.0 68.7 +19%
Adjusted EBITDA * 16.0 14.2 +13%
Adjusted EBITDA* % 19.4% 20.6% -120bps
Cash ** 15.3 17.2
Adjusted diluted earnings per share * 38.5p 32.3p +19%
Statutory Results
Operating profit 7.3 3.3 +123%
Profit before tax 7.1 2.6 +179%
Basic earnings per share 22.8p 5.1p +348%
Final dividend per share 1.2p 1.1p +9%
Total dividend per share 2.2p 2.0p +10%
Financial Highlights:
· Strong revenue growth across both Divisions
o Rail Technology & Services: up 26% to £37.9m (2022: £29.9m)
o Data, Analytics, Consultancy & Events: up 14% to £44.1m (2022:
£38.8m)
o Rail Technology & Services annual recurring and repeat revenue
increased 9% to £23.1m (2022: £21.1m)
· 10% Group organic revenue growth
· Adjusted EBITDA* margin reflects c.£1m investment in enhancing
capabilities and integrating the Group's activities
· £9.6m cash outflows for contingent and deferred acquisition
considerations; all material earn-outs now paid
· Healthy cash generation and strong debt-free balance sheet to
invest in further growth
· Continuation of progressive dividend policy. Proposed final
dividend of 1.2p per share, with total dividend of 2.2p per share (2022: 2.0p)
Operational and Strategic Highlights:
· Continued growth in rail technology software licence usage and
annual recurring revenue
o Delivery of three large multi-year SaaS contracts
o Record demand for Remote Condition Monitoring solutions
o Won two new Pay As You Go ("PAYG") smart ticketing technology contracts
· Strong contribution from Rail Technology North America with
fast-growing pipeline of opportunities
· High activity levels in Data, Analytics, Consultancy &
Events, including benefit from new contract wins
· Further progress made to simplify our organisational structure
based around common operating models
Current Trading and Outlook:
· The Board anticipates that FY24 performance will be in line with
market expectations
o Continued strong organic growth in Rail Technology & Services
software revenue; Data, Analytics, Consultancy & Events financial
performance at similar level to FY23
o FY24 growth is likely to be weighted towards H2, reflecting delivery
timelines and transition to SaaS for new contract wins in North America
o New opportunities currently being contracted for PAYG smart ticketing
and delay repay solutions
· Well positioned to deliver future growth
o Digital transformation remains integral to rail industry's future, and
we are seeing strong pipeline growth in all rail markets
o Network Rail CP7 funding of £43.1bn confirmed with a focus on improving
train performance for freight and passengers
o The 2023 Kings Speech has confirmed the government's intent via a draft
rail reform bill for Great British Railways to be established to serve as a
single point of accountability for the performance of the railway alongside a
commitment to roll-out PAYG ticketing across the UK
· Actions to complete the transformation of our operating model are
underway, creating a scalable platform for accelerated growth
Chris Barnes, Chief Executive Officer, commented:
"This has been a year of significant financial and operational progress for
Tracsis.
We have delivered strong organic and earnings-accretive acquisitive growth,
have completed the implementation of several large, complex enterprise
software contracts, and have made further progress in integrating the Group's
activities and enhancing our capabilities.
The performance of our North American rail business has been particularly
pleasing alongside the strong performance of all businesses within the Data,
Analytics, Consultancy and Events Division.
Q1 trading has started in line with expectations, and the Group remains well
positioned to deliver further growth in the coming year. We have a strong
orderbook and a fast growing opportunity pipeline across both Divisions. We
expect FY24 growth to be weighted towards H2 given the impact uncertainty in
UK rail has had on delivery timescales and the impact an expected SaaS
transition will have on the phasing of rail revenues in North America.
Digital transformation will continue to play a significant role in the rail
industry's transition to a data-driven, customer-focused, safety-critical
future. The breadth of Tracsis' product offering and leading digital
end-to-end solutions has a clear alignment to the growing needs of the rail
industry and increased demands from a customer experience perspective. We are
well placed to help the industry to increase passenger revenues whilst also
delivering operational performance improvements and efficiency savings.
We remain committed to implementing our overall strategic growth and
investment plans, and will continue to pursue both organic and acquisitive
growth supported by a strong balance sheet."
* In addition to statutory reporting, Tracsis plc reports alternative
performance measures ("APMs") which are not defined or specified under the
requirements of International Financial Reporting Standards ("IFRS"). 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.
APMs are used by the Directors and management for performance analysis,
planning, reporting and incentive purposes. A summary of APMs used and their
closest equivalent statutory measures is given in note 6.
** Cash and cash equivalents, and cash held in escrow
Presentation and Overview videos
Tracsis is hosting an online presentation open to all investors on Friday 17
November 2023 at 1.00pm UK time. Anyone wishing to connect should register
here: https://bit.ly/TRCS_FY_webinar (https://bit.ly/TRCS_FY_webinar)
A video overview of the results featuring CEO Chris Barnes and CFO Andy Kelly
is available to view here: https://bit.ly/TRCS_FY23_overview
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fbit.ly%2FTRCS_FY23_overview&data=05%7C01%7CAndrew.Kelly%40tracsis.com%7C7a08eaa1bc514c04699d08dbe4fab8fe%7C6b98f2667d234d0a8b8a7e4cf7fded86%7C0%7C0%7C638355537727710724%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=FCq0KHlspkM8NuItwsGkTndXia0dZ2jC9Gxo597%2BDhE%3D&reserved=0)
Demonstration videos of the Group's Rail Technology UK 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)
Cavendish Capital Markets Limited (NOMAD & Broker) Tel: 020 7220 0500
Jonny Franklin-Adams/Giles Balleny/Charlie Beeson (Corporate Finance)
Andrew Burdis/Sunila de Silva (Corporate Broking)
Alma Strategic Communications (Financial PR) Tel: 020 3405 0205
David Ison/Rebecca Sanders-Hewett/Joe Pederzolli tracsis@almapr.co.uk
Management Overview
The Group has performed well during the year ended 31 July 2023, delivering
strong organic and acquisitive growth, completing the implementation of
several software deployments from contracts won in previous years, and winning
new multi-year software contracts that will support further growth in
recurring revenues. Alongside a robust financial performance, we have made
further progress towards a more integrated operating model.
Simplifying the Group around common operating models
The Group has been reorganised into a new structure outlined below, with the
purpose of simplifying the business and aligning it around common operating
models. Rail Technology & Services is focused on software and hardware
products, with a strategic goal of driving increased recurring revenue. Data,
Analytics, Consultancy & Events is focused on operational deployment and
specialist consultancy services. Our Divisional segmentation remains unchanged
and consistent with prior years.
Rail Technology & Services
· Rail Technology UK (comprising Rail Operations & Planning,
Digital Railway & Infrastructure, and Rail Customer Experience)
· Rail Technology North America (previously RailComm)
Data, Analytics, Consultancy & Events
· Professional Services (comprising Data Analytics/GIS and
Transport Insights)
· Traffic Data & Events (comprising Traffic Data and Events
Transport Planning & Management)
Year in review
Our activities this year have been focused in six key areas, as summarised
below. This is followed by a table updating on progress against our strategy
and a comprehensive divisional breakdown of trading progress and prospects:
1. Successful delivery of large SaaS rail technology contracts with ongoing
implementations that will support further organic growth
Progress in UK rail: We have completed delivery of three large and complex
multi-year SaaS contracts for train operators and infrastructure owners with
others due to go live during FY24. Two end-to-end deployments of TRACS
Enterprise with Train Operating Companies ("TOCs") were completed, replacing
disparate legacy systems. Work continues on three further deployments that are
due to go live from FY24, including the first in the freight sector.
Alongside this, the roll-out of the large RailHub contract with Network Rail
completed with a pipeline of further opportunities.
New contracts to support future growth: In the UK, we won two contracts for
our pay-as-you-go ("PAYG") smart ticketing solution, including the first
contactless bank card deployment outside of Transport for London, set to go
live in FY24. We also secured the first deployment of our mobile app platform
"Hopsta" with a UK TOC, also expected to be completed in 2024.
Further growth in recurring revenue: As a result of the new contract wins and
the deployment of contracts won in previous years, annual recurring and
routinely repeating revenue in the Rail Technology & Services Division
increased by 9% to £23.1m.
Ongoing commercial momentum: Post year-end, we have begun contracting further
new opportunities for our PAYG smart ticketing and delay repay solutions.
Investing in 'next generation' technology: We are investing in technology
where we see opportunities to accelerate further growth in our markets. In
FY23 this included developing the Hopsta smart ticketing mobile app platform,
resulting in £0.3m of capitalised development costs. We have a pipeline of
innovative technology development opportunities under review, and will
determine the most appropriate investment model to realise these, which may
include further self-funded development where this can deliver an attractive
return on investment.
2. Strong performance in North America, with a growing pipeline of
opportunities
Poised for accelerated growth following first full year of ownership: Our
North American operations have rebranded to Tracsis post year-end. The
commercial team has been reorganised and the senior leadership, sales and
development personnel have been strengthened with a view to accelerating
growth.
Progress with large software deployment: Customer acceptance testing with a
transit customer for a licence in the order book on acquisition has been
completed, scheduled to be fully operational in early 2024.
Traditional core products performing well: We have a fast growing pipeline
growth for our Yard Automation and Computer Aided Dispatch products.
Remote Condition Monitoring cross-selling traction: On acquisition we stated
our intention to progressively market Tracsis' UK product portfolio into the
US. Strong progress has been made in growing the pipeline of Remote Condition
Monitoring opportunities and several user trials are currently live.
Unique market position: Tracsis operates in North America as a mid-market
competitor with a differentiated range of products and services. Feedback from
train operators and ports/industrials owners emphasises the need for new
market entrants to challenge incumbent suppliers and introduce innovative
digital solutions for immediate efficiency and operational benefits.
3. Digital transformation remains integral to the rail industry's future
Shaping the future: The delivery of a data-driven, customer-focused and
safety-critical rail industry will remain a core priority in the UK and
overseas. Tracsis' range of products and services are aligned with these end
market drivers, enabling customers to enhance efficiency, productivity,
performance and safety in mission-critical activities.
Near-term uncertainty in procurement and delivery timelines: The industrial
action in the UK that has been ongoing since June 2022 has in some cases
slowed decision-making as our customers focus on continually re-planning
timetables and services. However, the benefits case of our rail technology
products remain closely aligned with the focus of train operators and
infrastructure owners on revenue growth, operating efficiencies, cost savings
and safety improvements.
No expectation long-term growth prospects will be negatively impacted by
well-publicised issues: The ongoing industrial action, cancellation of the
northern part of HS2, delays to the implementation timing of Great British
Railways ("GBR") and potential government changes in the UK and US are not
anticipated to adversely affect future growth. While some near-term
procurement timelines may be affected due to changes in how funding is
allocated between entities (Network Rail, train operators, GBR, Rail Delivery
Group), the overall focus on improving safety, efficiency and customer
experience through technology will remain intact. We continue to see
significant long-term tailwinds in both the UK and North American rail
markets.
4. Record activity levels in Data, Analytics, Consultancy and Events
Record revenue in Traffic Data and Events: The strong performance can be
attributed to Events remaining in high demand, with new contract wins for
fixed venue work, and a return of Traffic Data activity to pre-pandemic
levels. The large multi-year National Road Traffic Census ("NRTC") contract
was renewed at an increased value, and post year-end we secured renewals with
some of our largest Events customers.
Strong demand for data analytics/GIS, earth observation, and specialist
transport consultancy services: Driven by a growing need in the transport and
environmental sectors for precise asset location and performance insights to
meet efficiency and ESG objectives. Demand levels for our specialist rail
consultancy and passenger analytics services in the period were high.
Underlying growth in FY24 offsets non-repeat revenue: The record performance
in FY23 included the benefit from certain revenue items that are not expected
to repeat in FY24, including certain events and sporting fixtures that are not
scheduled to re-occur in the year. We expect the Division overall to deliver a
financial performance at a similar level to FY23, with underlying growth
elsewhere offsetting this non-repeat revenue.
5. Good progress in integrating activities
Targeted investment to support the Group's long-term growth prospects: FY23
performance includes c.£1.0m investment in executing the following actions to
integrate the Group and enhance our capabilities. These actions have better
positioned the Group to deliver its long-term strategic growth ambitions.
Reorganising the business around common operating models: One of our key
objectives is to simplify the business and embed a common approach based on
industry best practice. During FY23 we have implemented a new organisational
structure based around common operating models. This is an important step in
our journey to create a fully integrated and scalable business.
Strengthening our core capabilities: To deliver the large orderbook of complex
product implementations, we have invested in our SaaS delivery capabilities,
including through the addition of an experienced programme management and IT
support team. In both the UK and in North America we have invested to build
out and upskill our commercial teams, better enabling us to access the large
market opportunities in both geographies.
Streamlining of Traffic Data and Events Transport Planning & Management
business: Both businesses have been fully integrated under a single senior
leadership team. This will deliver operating efficiencies, margin
optimisation, a consistent and focused approach to health and safety, and a
reduction of carbon emissions from our vehicle fleet as we move towards our
2030 carbon neutral target.
Enhanced IT infrastructure: The implementation of a new groupwide IT operating
environment is enhancing the efficiency and resilience of our operations while
facilitating collaboration across the Group. Further changes will be delivered
during FY24 to upgrade key IT systems.
Continued commitment to ESG: We have continued to deliver our "OneTracsis"
leadership programme for managers and senior leaders across the Group. We have
also hosted events focused on promoting accessibility to technology, including
a panel discussion on careers in tech and a hackathon themed around using
technology to develop a skilled, productive and inclusive workforce. Post
year-end we completed the groupwide implementation of ISO14001 to support the
delivery of our carbon neutral 2030 objective.
6. Transformation of the Group operating model
Transforming how we operate: Having completed the new organisational structure
during FY23, in the first quarter of FY24 we have started a programme of
actions to now transform the Group's operating model. The catalyst for these
activities is the lessons learned from the three large SaaS deployments
implemented since July 2022 and the need to establish a groupwide approach to
how we develop and deliver enterprise software solutions based around industry
best practice. The actions we are taking include: headcount reductions where
roles are duplicated or are no longer required; streamlining our legacy entity
and operating footprint; implementing a single groupwide IT support service;
and upgrading systems to deliver improved management information. We expect
these actions to be substantially completed during the FY24 financial year.
These changes will improve the timeliness, quality and repeatability of
delivery, which will enable the Group to accelerate its future revenue and
margin growth trajectory.
Anticipated transformation costs: We expect to incur c.£2m of non-repeat
costs in FY24 in order to deliver this transformation, primarily in cash.
These will be reported as exceptional costs so the underlying year on year
trading performance of the Group can be more clearly understood. These costs
will be weighted towards the first half of the year.
Progress on Delivering our Strategy
Tracsis' purpose is to empower the world to move freely, safely and
sustainably. Our business model remains focused on specialist product
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 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:
Drive Organic Growth
Delivery of our pipeline, increasing annual recurring software revenue,
continual innovation of products and services, high quality delivery and an
excellent close working relationship with our customers
Progress in 2023 Future Focus
· 10% organic growth for the Group · Delivery of a large orderbook of rail technology contracts including
further TRACS Enterprise and smart ticketing deployments
· 9% increase in Rail Technology & Services annual recurring
revenue · Growing pipeline of rail technology opportunities in UK and North
America
· Two full deployments of TRACS Enterprise completed since July 2022
· Leverage our unique position in North America to accelerate growth in
· Won two new contracts for the deployment of our Pay-As-You-Go (PAYG) this market
smart ticketing technology, with a further new opportunity secured post
year-end alongside a new delay repay award. · Continue to improve the quality, timeliness, and repeatability of
future product delivery
· Roll-out of RailHub enterprise software contract completed, more than
doubling the user base for this product to over 40,000 individual users
· Record revenue from Remote Condition Monitoring hardware and
software, and in the Data, Analytics, Consultancy & Events Division
· Multi-year contract wins and renewals in Professional Services and in
Traffic Data & Events
Expand Addressable Markets
Selling our products and services into new markets, including overseas, and
expansion into selected sectors that share problems with the industries we
currently serve
Progress in 2023 Future Focus
· Investment in developing mobile app smart ticketing platform · Continue to execute our organic growth strategy in North America,
supported by a growing pipeline
· Significant revenue growth in North America following 2022
acquisition of RailComm · Disciplined capital allocation for investment in software and
technology products
· Large software licence deployment for a new Computer Aided Dispatch
product in the North American transit market · Continued growth in Professional Services including in
information-as-a-service provision
· Targeted investment in sales team expansion in North America and UK
to accelerate pipeline growth · Utilise data analytics, GIS and Earth Observation capabilities to
deliver additional insight to our customers across the transportation sector
· Continued to develop TRACS Enterprise application for rail freight
market and added new station rostering product · Targeted growth opportunities overseas or in adjacent markets
Enhance Growth Through Acquisition
Supplementing organic growth with value accretive acquisitions that meet our
disciplined investment criteria, supported by healthy cash generation and a
strong balance sheet
Progress in 2023 Future Focus
· Strong performance from Rail Technology North America in first full · Active pursuit of M&A to extend technology and data informatics
year of ownership footprint, supported by strong balance sheet
· Multi-year data analytics contract win in Professional Services, · Continue to grow M&A pipeline, focused on UK, North America and
utilising the enhanced capabilities in earth observation following the prior targeted overseas markets
year acquisition of Icon GEO
· Maintain disciplined approach
· Further potential targets are constantly being evaluated
Implementing 'OneTracsis'
Enhanced integration and collaboration across the Group, increasing management
capability and bandwidth, and improving our systems and processes, as key
foundations to deliver our growth strategy
Progress in 2023 Future Focus
· Group now organised around common operating models · Complete transformation of the Group operating model
· Traffic Data & Events fully integrated under a common management · Continued alignment of groupwide systems and processes built around
team 'OneTracsis'
· Further strengthened our core capabilities with targeted recruitment · Accelerate R&D collaboration and new product development
for senior technology and commercial roles
· Continue to execute people strategy, with a focus on high performing
· Executing people strategy to attract, retain and develop talent teams and succession planning
· Groupwide ISO14001 (environmental management) implementation
completed post year-end
Trading Progress and Prospects
Rail Technology & Services
Summary segment results:
Revenue £37.9m
(2022: £29.9m)
Adjusted EBITDA* £10.4m (2022:
£9.8m)
Profit before Tax £5.2m
(2022: £4.8m)
The Rail Technology & Services Division delivered growth in both the UK
and in North America, supported by increased software licence usage and a full
year of ownership of RailComm (now Rail Technology North America). New
contract wins in the year and strong demand for Remote Condition Monitoring
were supplemented by completing delivery milestones on several large SaaS
deployments. These included the second full deployment of TRACS Enterprise
with a passenger TOC, and completing the roll-out of the large RailHub
enterprise software contract that was won in July 2021. We also delivered a
large software licence deployment for a new variant of our Computer Aided
Dispatch product in the North American transit market.
Total revenue of £37.9m was 26% higher than prior year. Organic growth of 8%
was supplemented by a strong performance from the Rail Technology North
America business. As a result of the new contract wins and the deployment of
contracts won in previous years, annual recurring and routinely repeating
revenue in the Rail Technology & Services Division increased by 9% to
£23.1m.
Adjusted EBITDA* increased by £0.6m to £10.4m (2022: £9.8m) and includes
c.£0.8m of investment associated with the integration of the Division's
activities and enhancing our core capabilities. Profit before Tax increased by
7% to £5.2m (2022: £4.8m) and includes a full year of amortisation following
the 2022 acquisition of RailComm.
Rail Technology UK
Total revenues from the Group's Rail Technology UK business increased by 9% to
£29.0m (2022: £26.6m), driven primarily by Remote Condition Monitoring (RCM)
and Customer Experience.
We saw high RCM volumes in the year, resulting in record revenue. Performance
in this product area is linked to the investment cycle trend of its UK
customer base which consists of 5 year 'Control Periods'. We have several
large contracts with Network Rail and with railway systems integrators for the
supply of RCM through the remainder of Control Period 6 which runs to 31 March
2024. Network Rail Control Period 7 funding of £43.1bn has been confirmed
starting from 1 April 2024 with a specific focus on improving train
performance for freight and passengers. This aligns very strongly with
Tracsis' product offerings.
Growth in Customer Experience revenue included the benefit from smart
ticketing and delay repay contract wins that went live in the previous
financial year, as well as new contracts won in the period and an increased
level of delay repay transaction volumes. Our smart ticketing product offering
is well aligned with passenger requirements and with the UK government's
strategic intent to deliver increased Pay As You Go (PAYG), multi-modal
ticketing. In January 2023 we won a new contract for the deployment of this
technology, with Transport for Wales ('TfW'). This will go live in 2024 and
will be the first EMV (contactless bank card) deployment of this versatile
solution on the UK's rail network outside of Transport for London. This will
be integrated with our delay repay product to provide an automated,
frictionless experience for the customer. TfW intends to ultimately extend
this offering to deliver a multi-modal PAYG solution including bus.
We have continued to invest in the deployment of a mobile app platform
('Hopsta') that puts this smart ticketing technology directly in the hands of
the consumer and avoids the requirement for expensive gateline infrastructure
in stations. We secured the first pilot deployment of this technology with a
UK TOC during the year, which is currently awaiting approval from Great
British Railways to be delivered as part of a wider set of PAYG trials. We
continue to see high levels of interest in our smart ticketing product across
ITSO smartcard, EMV and barcode solutions. Post year-end we have been selected
to deliver two further multi-year contracts for our Customer Experience
solutions - one for PAYG smart ticketing and one for delay repay. Both are in
the process of being contracted with UK train operators and will go live in
2024.
Across the other parts of the Rail Technology UK product portfolio there was a
significant focus during the year on delivering a large orderbook of
multi-year SaaS contracts, which has been challenging. This included
completing the second full deployment of TRACS Enterprise with a UK TOC. Work
continues on three further deployments that are due to go live from FY24,
including the first in the freight sector. We continue to see a good pipeline
of new opportunities for this product in both the passenger and freight
sectors of the industry. Delivery timelines in this sector are typically
determined in partnership with our customers based around combined resource
availability. Total revenue was lower than the prior year including lower
levels of project milestone revenue aligned with these delivery timelines. We
are investing in technical and programme management capabilities to support
improved delivery in this area, and have started work to modularise the
product architecture to facilitate faster product deployment. We have also
developed and gone live with a new station rostering product which is a
further extension of our TRACS Enterprise product suite. This is now available
to all train operators.
During the year we also completed the roll-out of the large RailHub enterprise
software contract that was won in July 2021. This has embedded RailHub as the
core platform used to plan and safely deliver upgrade and maintenance work on
or near the railway line in the UK, and has more than doubled the user base
for this product to over 40,000 individuals across Network Rail and the supply
chain. There is a strong pipeline of future opportunities for the RailHub
platform including additional functionality that is being developed by
Tracsis.
Rail Technology North America
Total revenue of £8.9m was £5.6m higher than prior year, which includes the
benefit from a full year of ownership.
In the first half of the year we delivered a large software licence deployment
milestone for a new Computer Aided Dispatch product (PTC BOS 1 (#_ftn1) ).
This is part of a large and ongoing project with a transit operator and will
result in increased recurring revenues as the solution is rolled out across
its operations, which is expected to be completed in 2024. This first
deployment opens a large new product segment opportunity for Tracsis in North
America where the industry is actively looking for new technology entrants.
We are seeing good growth in the pipeline of opportunities in this market,
where Tracsis operates as a mid-market competitor with a unique range of
products and services with limited direct competition. Growth in the near-term
is expected to come from across our portfolio of Computer Aided Despatch
(CAD), Yard Automation, and Remote Condition Monitoring (RCM) products.
In order to drive further growth we have restructured the commercial
organisation of this business, including targeted investment in the sales
team. Post year-end we have rebranded our North American operations to
'Tracsis', in alignment with the rest of the Group.
To date we have seen more procurement of perpetual licences in the North
American market than in our Rail Technology UK business. We believe this will
transition to an increasingly SaaS-focused model over time. During this
period, there will likely be more volatility in the phasing of revenue growth
in this market. Following the large PTC BOS perpetual licence deployment in H1
of FY23 discussed above, we expect the weighting of growth in FY24 to be more
towards the second half of the year.
Data, Analytics, Consultancy & Events
Summary segment results:
Revenue £44.1m
(2022: £38.8m)
Adjusted EBITDA* £5.6m (2022:
£4.4m)
Profit before Tax £3.0m
(2022: £1.8m)
Activity levels across the Data, Analytics, Consultancy & Events Division
were high, with several contract wins in the period and the completion of the
post-Covid lockdown recovery in the Traffic Data market. New contract wins
included a multi-year Earth Observation contract in Professional Services, the
renewal of a large multi-year contract in Traffic Data at an increased value,
and additional fixed venue contracts in Events Transport Planning &
Management.
Revenue increased by 14% to £44.1m (2022: £38.8m) as a result of this
increase in activity. This more than offset c.£1.4m in the prior year to
support Covid testing and vaccination centres, that did not repeat in FY23.
Adjusted EBITDA* increased by 27% to £5.6m (2022: £4.4m). Profit before Tax
increased by 61% to £3.0m (2022: £1.8m).
During the year, the Traffic Data and Events Transport Planning &
Management businesses have been fully integrated into a single operating unit
under a common leadership team. This will support margin optimisation from
operating efficiencies, and also enable a consistent and focused approach to
health and safety and to reducing carbon emissions from our vehicle fleet as
we move towards our 2030 carbon neutral target. Activities are underway to
streamline the operating footprint of this business.
The performance of the Data, Analytics, Consultancy & Events Division in
FY23 included the benefit from certain revenue items that are not expected to
repeat in FY24, including certain events and sporting fixtures that are not
scheduled to re-occur in the year. We expect the Division overall to deliver a
financial performance at a similar level to FY23, with underlying growth
elsewhere offsetting this non-repeat revenue.
Professional Services
Total revenue across our Data Analytics/GIS and Transport Insights businesses
increased by 17% to £15.4m (2022: £13.2m). This includes the benefit from a
multi-year Earth Observation contract secured in Ireland which utilises the
capabilities added to the Group through the Icon GEO acquisition in November
2021. This contract is to develop an Area Monitoring System (AMS) using
satellite data imagery and is being delivered in partnership with two European
geospatial companies. We also secured a range of new opportunities with Irish
Government departments and utility companies. Alongside this, we saw continued
strong demand for our specialist transport consultancy offering, including for
timetabling and rail performance expertise. We also won a large travel survey
that was delivered in the second half of the year.
Traffic Data & Events
The combined Traffic Data & Events business delivered a record level of
revenue in the year, with total revenue increasing by 12% to £28.8m (2022:
£25.6m). Activity levels in Events remained high, with particularly strong
demand for sporting and music events in the final quarter of the financial
year. The business has won several new multi-year contracts for fixed venue
work, and post year-end has secured renewals with several of its largest
customers. In the Traffic Data market, activity levels returned to pre-Covid
lockdown levels. Some month-to-month variability in demand remains and
activity levels in this market remain more sensitive to central and local
authority funding. The large, multi-year National Road Traffic Census ('NRTC')
contract was renewed in the year with an increased scope and increased value.
Financial Summary
Group revenue of £82.0m was £13.3m (19%) higher than the prior year (2022:
£68.7m), reflecting strong organic and acquisitive growth. Revenue in the
Rail Technology & Services Division increased by £8.0m (26%) including
the benefit from new contract wins in the year and in the prior year, record
demand for Remote Condition Monitoring, and a strong performance from Rail
Technology North America. Revenue in the Data, Analytics, Consultancy &
Events Division increased by £5.3m (14%) and includes a record level of
activity in the newly integrated Traffic Data & Events business as well as
increased activity levels across our Professional Services offerings.
Adjusted EBITDA* of £16.0m was £1.8m (13%) higher than prior year (2022:
£14.2m), and includes c.£1.0m of investment to integrate our operating model
and enhance our capabilities.
Statutory profit before tax of £7.1m is £4.6m higher than prior year (2022:
£2.6m). In addition to the £1.8m increase in adjusted EBITDA* described
above, the movement in profit before tax reflects the following items:
· £2.1m depreciation charge which is higher than the prior year
reflecting a full year charge from FY22 acquisitions and investments in
upgrading our IT infrastructure (2022: £1.8m);
· £5.6m amortisation of intangible assets (2022: £5.0m). The
increase versus prior year reflects a full year charge relating to the FY22
acquisitions of RailComm and Icon GEO
· £1.2m share based payment charges (2022: £1.5m);
· £0.1m exceptional items (2022: £3.1m) representing £0.7m
unwinding of previously discounted contingent consideration balances in
accordance with IFRS accounting standards (2022: £0.8m), offset by a net
£0.6m decrease in the assessed fair value of contingent consideration based
on the future expectations of performance from previous acquisitions (2022:
£1.8m net increase) which principally relates to certain contracts in Icon
GEO that have been superseded by a new contract won by the Group in the year
utilising the combined capabilities of our existing Data Analytics/GIS
business with Icon GEO's earth observation technologies. The prior year also
included the following items that were not repeated this year: £0.6m of
transaction costs associated with acquisitions and a £0.1m impairment charge
relating to an equity accounted investee, partly offset by a £0.2m credit
relating to the fair value adjustment and subsequent gain on settlement of a
financial liability
· £0.1m net finance expense (2022: £0.1m); and
· £nil charge relating to the share of the results of equity
accounted investees (2022: £0.6m charge)
Adjusted earnings per share increased by 19% to 39.4 pence (2022: 33.2 pence).
Statutory earnings per share increased to 22.8 pence (2022: 5.1 pence).
Cash Generation
The Group continues to have significant levels of cash and remains debt free.
At 31 July 2023 the Group's cash balances were £15.3m (2022: £17.2m
including cash held in escrow). Cash generation remains healthy.
Free cash flow(+) increased to £8.0m (2022: £5.8m). In addition to the
£1.8m increase in adjusted EBITDA* described above, this reflects the
following items:
· A net £2.7m increase in working capital (2022: £4.0m increase)
reflecting normal trading patterns and including an increase in trade
receivables in the final trading months of the year following very high
activity levels in Traffic Data & Events. The Group has not had any
material bad debt instances;
· Net capital expenditure increased to £1.5m (2022: £1.0m) which
principally reflects the increased activity levels in Traffic Data &
Events, investment in IT assets as part of implementing a new groupwide IT
operating environment, and the initial investment in electric vehicles as we
start to decarbonise our vehicle fleet;
· Net lease liability payments of £1.5m were at a similar level to
the prior year (2022: £1.4m);
· Capitalised development costs of £0.3m (2022: £nil) relate to
the Hopsta smart ticketing mobile app platform for our PAYG smart ticketing
technology;
· £nil cash outflows on exceptional items. In the prior year there
was a £0.6m cash outflow on transaction costs for acquisitions completed in
the year;
· Tax paid of £2.1m was £0.8m higher than the prior year (2022:
£1.3m), reflecting the growth in earnings; and
· £0.1m net cash inflows from net interest received, proceeds from
the exercise of share options, and the profit or loss on disposal of property,
plant and equipment (2022: £0.1m outflow).
Free Cash Flow(+)
Year ended Year ended
31 July 31 July
2023 2022
£'m £'m
Adjusted EBITDA * 16.0 14.2
Changes in working capital (2.7) (4.0)
Purchase of plant and equipment (net of proceeds from disposal) (1.5) (1.0)
Lease liability payments (net of lease receivable receipts) (1.5) (1.4)
Capitalised development costs (0.3) -
Cash outflows on exceptional items - (0.6)
Tax paid (2.1) (1.3)
Other((1)) 0.1 -
Free Cash Flow(+) 8.0 5.8
(+) Net cash flow from operating activities after purchase of property, plant
and equipment, proceeds from disposal of property, plant and equipment,
proceeds from exercise of share options, lease liability payments, lease
liability receipts and capitalised development costs, and before payment of
contingent consideration
((1)) Includes net interest received or paid, profit on disposal of plant
& equipment, and proceeds from exercise of share options
There was a total cash outflow of £9.3m (2022: £4.1m) relating to contingent
consideration on the previous acquisitions of Bellvedi and iBlocks (part of
Rail Technology UK), RailComm (Rail Technology North America), and Compass
Informatics and Icon GEO (part of Professional Services). This was in line
with the Board's expectations and is aligned to strong performance from these
historic acquisitions. All material contingent consideration balances have now
been paid. In addition, there was a cash outflow of £0.3m (2022: £0.3m)
relating to deferred consideration for the 2021 acquisition of Flash Forward
Consulting. The final instalment of £0.3m deferred consideration for this
acquisition will be paid in February 2024. In the prior year there was an
additional cash outflow of £0.4m to repurchase "A" shares in Tracsis Rail
Consultancy.
Dividends paid to shareholders were £0.6m (2022: £0.3m) and there was a
£0.3m favourable impact from foreign exchange (2022: £0.2m favourable).
As a result, total cash balances decreased by £1.9m to £15.3m.
Dividend
The Group remains committed to the progressive dividend policy that was
adopted in 2012. The Board has recommended a final divided of 1.2 pence per
share. The final dividend, subject to shareholder approval at the forthcoming
Annual General Meeting, will be paid on 9 February 2024 to shareholders on the
register at the close of business on 26 January 2024. This will bring the
total dividend for the year to 2.2 pence per share.
Board
Jill Easterbrook succeeded Chris Cole as Non-Executive Chair of the Board on 1
September 2023. Chris stepped down from the Board on the same date. This is
part of the Board succession planning following the completion of Chris's
third three-year term. Tracy Sheedy joined the Board as a Non-Executive
Director on 1 September 2023, and succeeded Jill Easterbrook as Chair of the
Remuneration Committee from that 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
via digital transformation that enables them to deliver mission-critical
activities with increased efficiency, enhanced performance, higher
productivity, and improved safety. In the UK and North America we see
significant long-term tailwinds as the industry looks to modernise and adopt
digital solutions. We believe that we are well positioned to capitalise on
these changes and have a growing pipeline of opportunities to help drive
market share and expand our footprint in these markets. A change of
government in the UK and/or the US is not expected to impact these growth
drivers.
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 have recognised the need to
accelerate the transformation of the Group's operating model based on lessons
learned from recent SaaS implementations and we will invest over the coming
year in the actions required to provide a robust platform for ongoing scalable
growth based on best practices.
We continue to actively pursue M&A opportunities, with a focus on
extending our software and technology footprint and enhancing recurring
revenue growth.
Q1 trading has started in line with expectations and the Group remains well
positioned to deliver further growth in the coming financial year and beyond.
Jill Easterbrook Chris Barnes
Non-Executive Chair Chief Executive Officer
14 November 2023
Consolidated Statement of Comprehensive Income for the year ended 31 July 2023
2023 2022
Notes £000 £000
Revenue 3 82,023 68,723
Cost of sales (32,072) (26,483)
Gross profit 49,951 42,240
Administrative costs (42,696) (38,985)
Adjusted EBITDA* 3,6 15,952 14,161
Depreciation (2,110) (1,767)
Amortisation of intangible assets (5,599) (5,000)
Other operating income 350 426
Share-based payment charges (1,248) (1,502)
Operating profit before exceptional items 7,345 6,318
Exceptional items: 9
Impairment losses - (49)
Other (90) (3,014)
Operating profit 7,255 3,255
Net finance expense (119) (141)
Share of result of equity-accounted investees - (556)
Profit before tax 3 7,136 2,558
Taxation 10 (329) (1,056)
Profit after tax 6,807 1,502
Other comprehensive (expense) / income
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences (205) 423
Items not to be reclassified to profit and loss in subsequent period:
Revaluation of financial assets - (50)
Total comprehensive income for the year 6,602 1,875
Earnings per Ordinary Share
Basic 4 22.81p 5.09p
Diluted 4 22.30p 4.95p
* 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
Consolidated Balance Sheet as at 31 July 2023
2023 2022
Remeasured*
Notes £000 £000
Non-current assets
Property, plant and equipment 4,789 4,897
Intangible assets 57,694 63,548
Investments - equity - -
Deferred tax assets 650 410
63,133 68,855
Current assets
Inventories 1,465 1,090
Trade and other receivables 20,371 18,376
Current tax receivables 628 78
Cash held in escrow - 2,217
Cash and cash equivalents 15,307 14,970
37,771 36,731
Total assets 100,904 105,586
Non-current liabilities
Lease liabilities 953 1,476
Contingent consideration payable 8 139 736
Deferred consideration payable 8 - 297
Deferred tax liabilities 7,161 8,352
8,253 10,861
Current liabilities
Lease liabilities 1,137 1,291
Trade and other payables 23,435 24,092
Contingent consideration payable 8 - 8,585
Deferred consideration payable 8 308 308
24,880 34,276
Total liabilities 33,133 45,137
Net assets 67,771 60,449
Equity attributable to equity holders of the company
Called up share capital 120 119
Share premium reserve 6,535 6,436
Merger reserve 6,161 6,161
Retained earnings 54,875 47,448
Translation reserve 130 335
Fair value reserve (50) (50)
Total equity 67,771 60,449
* As described in note 7, the comparative balance sheet at 31 July 2022 has
been amended following the re-measurement of deferred tax liabilities on
intangible assets recognised in the Group's March 2022 acquisition of RailComm
with a corresponding adjustment to goodwill arising on the acquisition. This
has had the effect of reducing intangible assets and deferred tax liabilities
by £2,319,000 at 31 July 2022; there was no impact on net assets.
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 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
Share Capital Share Premium Merger Reserve Retained Earnings Translation Reserve Fair Value Reserve Total
£000 £000 £000 £000 £000 £000 £000
At 1 August 2022 119 6,436 6,161 47,448 335 (50) 60,449
Profit for the year - - - 6,807 - - 6,807
Other comprehensive income - - - - (205) - (205)
Total comprehensive income - - - 6,807 (205) - 6,602
Transactions with owners:
Dividends (note 5) - - - (628) - - (628)
Share-based payment charges - - - 1,248 - - 1,248
Exercise of share options 1 99 - - - - 100
At 31 July 2023 120 6,535 6,161 54,875 130 (50) 67,771
Consolidated Cash Flow Statement for the year ended 31 July 2023
2023 2022
Notes £000 £000
Operating activities
Profit for the year 6,807 1,502
Net finance expense 119 141
Depreciation 2,110 1,767
Loss / (profit) on disposal of property, plant and equipment 9 (70)
Non-cash exceptional items 9 90 2,441
Payment of contingent consideration* 8 (1,661) -
Other operating income (350) (426)
Amortisation of intangible assets 5,599 5,000
Share of result of equity-accounted investees - 556
Income tax charge 10 329 1,056
Share-based payment charges 1,248 1,502
Operating cash inflow before changes in working capital 14,300 13,469
Movement in inventories (416) (233)
Movement in trade and other receivables (2,085) (4,103)
Movement in trade and other payables (213) 383
Cash generated from operations 11,586 9,516
Interest received 36 6
Income tax paid (2,065) (1,334)
Net cash flow from operating activities 9,557 8,188
Investing activities
Purchase of property, plant and equipment (1,524) (1,129)
Proceeds from disposal of property, plant and equipment 10 123
Capitalised development costs (300) -
Acquisition of subsidiaries (net of cash acquired) 7 - (9,097)
Payment of contingent consideration* 8 (7,591) (4,126)
Cash held in escrow for payment of contingent consideration 8 2,233 (2,217)
Payment of deferred consideration 8 (315) (315)
Net cash flow used in investing activities (7,487) (16,761)
Financing activities
Dividends paid 5 (628) (266)
Proceeds from exercise of share options 100 37
Settlement of financial liability - (416)
Lease liability payments (1,491) (1,421)
Lease receivable receipts 32 32
Net cash flow used in financing activities (1,987) (2,034)
Net increase / (decrease) in cash and cash equivalents 83 (10,607)
Exchange adjustments 254 190
Cash and cash equivalents at the beginning of the year 14,970 25,387
Cash and cash equivalents at the end of the year 15,307 14,970
* The total payment of contingent consideration during the year was
£9,252,000 (2022: £4,126,000). In accordance with IAS 7, Statement of Cash
Flows this has been included within:
- cash flow used in investing activities to the extent that they relate to the
fair value of assets acquired in the business combinations; and
- cash flow from operating activities to the extent that they relate to
conditions and events after the acquisition date which have been recognised in
profit and
loss.
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 year ended 31 July 2023 or the year ended 31 July
2022 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
2023 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 2022 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 2023 the
Group had net cash and cash equivalents totalling £15.3m. The Board has
prepared cash flow forecasts for the period through to December 2024 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 in light of the trading performance in the period since
the year-end.
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:
2023 2022
£000 £000
Rail Technology & Services 37,862 29,935
Data, Analytics, Consultancy & Events 44,161 38,788
Total revenue 82,023 68,723
Revenue can also be analysed as follows:
2023 2022
£000 £000
Rail Technology & Services - United Kingdom 28,975 26,603
Rail Technology & Services - North America 8,887 3,332
Rail Technology & Services 37,862 29,935
Traffic Data & Events 28,793 25,610
Professional Services 15,368 13,178
Data, Analytics, Consultancy & Events 44,161 38,788
Total revenue 82,023 68,723
Major customers
Transactions with the Group's largest customer represent 9% of the Group's
total revenues (2022: 12%).
Geographic split of revenue
A geographical analysis of revenue by customer location is provided below:
2023 2022
£000 £000
United Kingdom 61,422 55,849
Ireland 10,802 8,827
Rest of Europe 378 280
North America 8,643 3,343
Rest of the World 778 424
Total revenue 82,023 68,723
b) Segmental Analysis
The Group has divided its results into two segments being Rail Technology
& Services and Data, Analytics, Consultancy & Events consistent with
the disclosure in the 2022 financial
statements.
The Group has a wide range of 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, event planning and traffic
management, data, 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 each 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. Segmental profit
before tax has been further analysed to allocate amortisation and exceptional
items. Segmental assets and liabilities have been further analysed to allocate
intangibles and investments, contingent consideration and deferred
consideration to each individual segment.
2023 Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated Total
£000 £000 £000 £000
Revenues
Total revenue for reportable segments 37,862 44,161 - 82,023
Consolidated revenue 37,862 44,161 - 82,023
Profit or loss
EBITDA for reportable segments 10,373 5,579 - 15,952
Amortisation of intangible assets (4,273) (1,326) - (5,599)
Depreciation (913) (1,197) - (2,110)
Exceptional items (net) - - (90) (90)
Other operating income - - 350 350
Share-based payment charges - - (1,248) (1,248)
Interest payable (net) (31) (88) - (119)
Consolidated profit before tax 5,156 2,968 (988) 7,136
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
2023 Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated Total
£000 £000 £000 £000
Assets
Total other assets for reportable segments 11,196 16,057 - 27,253
Intangible assets and investments 47,362 10,332 - 57,694
Deferred tax assets - - 650 650
Cash and cash equivalents 7,959 7,348 - 15,307
Consolidated total assets 66,517 33,737 650 100,904
Liabilities
Total other liabilities for reportable segments (15,707) (9,818) - (25,525)
Deferred tax liabilities - - (7,161) (7,161)
Contingent consideration - (139) - (139)
Deferred consideration - (308) - (308)
Consolidated total liabilities (15,707) (10,265) (7,161) (33,133)
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 51,958 11,590 - 63,548
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 74,028 31,148 410 105,586
Liabilities
Total other liabilities for reportable segments (17,070) (9,789) - (26,859)
Deferred tax liabilities - - (8,352) (8,352)
Contingent consideration (8,320) (1,001) - (9,321)
Deferred consideration - (605) - (605)
Consolidated total liabilities (25,390) (11,395) (8,352) (45,137)
* As described in note 7, the comparative balance sheet at 31 July 2022 has
been amended following the re-measurement of deferred tax liabilities on
intangible assets recognised in the Group's March 2022 acquisition of Railcomm
with a corresponding adjustment to goodwill arising on the acquisition. This
has had the effect of reducing Rail Technology & Services intangible
assets and unallocated deferred tax liabilities by £2,319,000 at 31 July
2022; there was no impact on total net assets.
4. Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the year ended 31 July 2023
was based on the profit attributable to ordinary shareholders of £6,807,000
(2022: £1,502,000) and a weighted average number of ordinary shares in issue
of 29,836,000 (2022: 29,486,000), calculated as follows:
Weighted average number of ordinary shares
In thousands of shares 2023 2022
Issued ordinary shares at 1 August 29,662 29,332
Effect of shares issued related to business combinations - 51
Effect of shares issued for cash 174 103
Weighted average number of shares at 31 July 29,836 29,486
Diluted earnings per share
The calculation of basic earnings per share for the year ended 31 July 2023
was based on the profit attributable to ordinary shareholders of £6,807,000
(2022: £1,502,000) and a weighted average number of ordinary shares in issue
after adjustment for the effects of all dilutive potential ordinary shares of
30,529,000 (2022: 30,330,000).
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 equity 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.
2023 2022
£000 £000
Profit after tax 6,807 1,502
Amortisation of intangible assets 5,599 5,000
Share-based payment charges 1,248 1,502
Exceptional items (net) 90 3,063
Other operating income (350) (426)
Tax impact of the above adjusting items (1,638) (847)
Adjusted profit for EPS purposes 11,756 9,794
Weighted average number of ordinary shares
In thousands of shares 2023 2022
For the purposes of calculating basic earnings per share 29,836 29,486
Adjustment for the effects of all dilutive potential ordinary shares 693 844
For the purposes of calculating diluted earnings per share 30,529 30,330
Basic adjusted earnings per share 39.40p 33.22p
Diluted adjusted earnings per share 38.51p 32.29p
5. Dividends
The Board intends to pursue a sustainable and progressive dividend policy,
having regard to the development of the Group. The cash cost of the dividend
payments is below:
2023 2022
£000 £000
Interim dividend for 2021/22 - 266
Final dividend for 2021/22 328 -
Interim dividend for 2022/23 300 -
Total dividends paid 628 266
The dividends paid or proposed in respect of each financial year is as
follows:
2023 2022
£000 £000
Interim dividend for 2021/22 of 0.9p per share paid - 266
Final dividend for 2021/22 of 1.1p per share paid - 328
Interim dividend for 2022/23 of 1.0p per share paid 300 -
Final dividend for 2022/23 of 1.2p per share proposed 361 -
The total dividends paid or proposed in respect of each financial year ended
31 July is as follows:
2023 2022 2021 2020 2019 2018 2017 2016 2015
Total dividends paid per share 2.2p 2.0p £nil £nil 1.8p 1.6p 1.4p 1.2p 1.0p
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"). 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 on initial recognition
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:
2023 2022
£000 £000
Profit before tax 7,136 2,558
Finance expense - net 119 141
Share-based payment charges 1,248 1,502
Exceptional items - net 90 3,063
Other operating income (350) (426)
Amortisation of intangible assets 5,599 5,000
Depreciation 2,110 1,767
Share of result of equity-accounted investees - 556
Adjusted EBITDA 15,952 14,161
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
equity 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
property, plant and equipment, proceeds from disposal of property, plant and
equipment, proceeds from exercise of share options, lease liability payments,
lease receivable receipts and capitalised development costs, and before
payment of contingent consideration. 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:
2023 2022
£000 £000
Net cash flow from operating activities 9,557 8,188
Purchase of property, plant and equipment (1,524) (1,129)
Proceeds from disposal of property, plant and equipment 10 123
Capitalised development costs (300) -
Proceeds from exercise of share options 100 37
Add back: payment of contingent consideration presented within cash flow from 1,661 -
operating activities
Lease liability payments (1,491) (1,421)
Lease receivable receipts 32 32
Free cash flow 8,045 5,830
7. Acquisitions
Acquisitions in the current year
There were no acquisitions during the year ended 31 July 2023.
Acquisitions in the previous year
a) The Icon Group Limited ("Icon GEO")
On 3 November 2021 the Group acquired the entire issued share capital of The
Icon Group Limited ("Icon GEO"). Icon GEO is an Ireland-based
interdisciplinary geoscience company specialising in earth observation ("EO"),
geographical information system ("GIS") and spatial data analytics.
Full details of the Icon GEO acquisition were given in note 5 to the Group's
2022 Financial Statements
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.
Full details of the RailComm acquisition were given in note 5 to the Group's
2022 Financial Statements.
During the year management determined that an opportunity existed to obtain
tax deductions on certain acquired intangible assets, including customer,
technology, order-book and marketing-related intangibles and adopted a change
in their expected tax filing basis accordingly. As this change took place
within the 12- month measurement period prescribed by IFRS 3 Business
Combinations the accounting impact of the change has been recorded
retrospectively at the time of acquisition. As a consequence, goodwill and
deferred tax liabilities arising on acquisition were each reduced by
£2,159,000. Foreign exchange movements between the acquisition date and 31
July 2022 were £160,000.
The comparative balance sheet values of £2,319,000 at 31 July 2022 have been
amended accordingly.
8. Contingent and deferred consideration
a) Contingent consideration
During the financial year, the final contingent consideration due on the 2019
acquisition of Compass Informatics Limited was paid totalling £377,000 (2022:
£281,000). A £116,000 loss was recognised on the change in fair value of the
liability up to the payment date.
The final contingent consideration due on the 2019 acquisition of Bellvedi
Limited was also paid totalling £4,314,000 (2022: £3,586,000). A £32,000
loss was recognised on the change in fair value of the liability up to the
payment date.
The final contingent consideration due on the 2020 acquisition of iBlocks
Limited was also paid totalling £2,365,000 (2022: £nil). A £7,000 gain was
recognised on the change in fair value of the liability up to the payment
date.
The final contingent consideration due on the 2022 acquisition of Railcomm,
LLC and Railcomm Associates Inc was also paid totalling $2,700,000
(£2,174,000; 2022: £nil). No gain or loss was recognised on the change in
fair value of the liability up to the payment date. Cash held in escrow for
the settlement of the contingent consideration was fully utilised for this
purpose.
In 2022 the Group acquired The Icon Group Limited ("Icon GEO"). Under the
share purchase agreement, contingent consideration is payable which is based
on the profitability of Icon GEO in the three-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
(£1,500,000). During the financial year, an instalment payment was made
totalling £22,000. Based on reduced activity under certain contracts and
current expectations regarding the renewal of certain contracts, the fair
value of the amount payable was assessed as €162,000 (£139,000 at 31 July
2023) generating a £700,000 gain on the change in fair value of the
liability.
As detailed in note 9, a net exceptional credit of £559,000 was recognised,
following the settlement of liabilities during the year and a review of the
assumptions of the fair value of the outstanding contingent consideration as
at 31 July 2023. At the balance sheet date, the Directors assessed the fair
value of the remaining amounts payable which were deemed to be as
follows:
2023 2022
£000 £000
Compass Informatics Limited - 243
Bellvedi Limited - 3,940
iBlocks Limited - 2,224
The Icon Group Limited 139 757
Railcomm, LLC - 2,157
139 9,321
The movement on contingent consideration can be summarised as follows:
2023 2022
£000 £000
At the start of the year 9,321 7,909
Arising on acquisition (note 7) - 2,832
Cash payment (9,252) (4,126)
Fair value adjustment to statement of comprehensive income (559) 1,792
Unwind of discounting 649 774
Exchange adjustment (20) 140
At the end of the year 139 9,321
The ageing profile of the remaining liabilities can be summarised as follows:
2023 2022
£000 £000
Payable in less than one year - 8,585
Payable in more than one year 139 736
Total 139 9,321
b) Deferred consideration
The Group acquired Flash Forward Consulting Limited on 26 February 2021. As
part of this acquisition cash consideration totalling £945,000 became payable
in three equal instalments on the first, second and third 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 2023 the present value of this deferred consideration is £308,000.
The movement on deferred consideration can be summarised as follows:
2023 2022
£000 £000
At the start of the year 605 892
Cash payment (315) (315)
Unwind of discounting 18 28
At the end of the year 308 605
The ageing profile of the remaining liabilities can be summarised as follows:
2023 2022
£000 £000
Payable in less than one year 308 308
Payable in more than one year - 297
Total 308 605
9. Exceptional items
The Group incurred a number of exceptional items in 2023 and 2022 which are
analysed as follows:
2023 2022
£000 £000
Impairment losses
Non-cash:
Investment in associate - 49
Total impairment losses - 49
Other
Non-cash:
Contingent consideration fair value adjustment (559) 1,792
Unwind of discounting of contingent consideration 649 774
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
activities
Total other 90 3,014
Total exceptional items 90 3,063
2023 2022
Split: £000 £000
Non-cash 90 2,441
Cash - 622
Total 90 3,063
2023
An exceptional £559,000 credit has been recognised in the income statement
representing the net decrease in the fair value of contingent consideration
payable at the end of the financial year. This principally relates to certain
contracts in Icon GEO that have been superseded by a new contract won by the
Group in the year utilising the combined capabilities of our existing Data
Analytics/GIS business with Icon GEO's earth observation technologies.
A further charge totalling £649,000 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.
2022
In the previous financial year, an exceptional cost was recognised to increase
the fair value of the contingent consideration payable at the end of that
year. A £1,792,000 charge to the income statement was recorded which
reflected the increased pipeline for software contract opportunities, and the
impact of software contracts which were secured in that year. A further charge
totalling £774,000 was recognised which reflected the unwinding of the
discount on contingent consideration. The discount rates applied varied by
acquisition and were in the range of 3.25% to 14.5%. These costs were deemed
to be exceptional due to their size and volatility 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 repurchase and a resulting fair value adjustment of £127,000 was
recognised in the previous financial year. Consideration for the shares paid
was £416,000 and a resulting one-off gain of £47,000 was recognised in the
previous financial year.
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 of legal and professional costs associated with
the transfer of a UK employee to oversee the integration of the acquisition.
Legal and professional fees were also incurred in relation to one-off
transactions (including the re-purchase of TRC A shares) and as they will not
recur in future years, were deemed to be exceptional in nature.
An impairment loss of £49,000 was recognised in the previous financial year
in relation to the investment in an 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.
10. Taxation
The effective tax rate can be reconciled as follows:
2023 2023 2022 2022
£000 % £000 %
Profit before tax for the period 7,136 2,558
Expected tax charge based on the standard rate of corporation tax in the UK of 1,499 21.0 486 19.0
21.0% (2022: 19.0%)
Expenses not deductible for tax purposes 59 0.8 623 24.4
Rate changes (168) (2.4) - -
Adjustments in respect of previous years (427) (6.0) (71) (2.8)
Overseas tax not at UK tax rate (235) (3.3) (104) (4.1)
Trading losses carried forward - - 73 2.9
Share-based payments differences (399) (5.5) 49 1.9
Total tax charge 329 4.6 1,056 41.3
11. Subsequent Events
On 1 September 2023 Jill Easterbrook was appointed Non-Executive Chair of the
Board; at the same date Chris Cole resigned from the Board and Tracy Sheedy
was appointed to the Board as a Non-Executive Director and succeeded Jill as
Chair of the Remuneration Committee. Tracy also joined the Audit and
Nomination Committees at that
date.
12. Annual Report and Annual General Meeting
The Company anticipates dispatching a copy of its annual report and accounts
to all shareholders in December 2023. 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 24 January 2024 at
2pm.
1 (#_ftnref1) Positive Train Control Back Office Solution. This integrates
Tracsis' Computer Aided Dispatching (CAD) product with the Positive Train
Control (PTC) family of automatic train protection systems in the US.
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