REG - Tracsis PLC - Final Results
20/11/2024 07:00
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RNS Number : 8759M Tracsis PLC 20 November 2024
Tracsis plc
('Tracsis', 'the Company' or 'the Group')
Audited results for the year ended 31 July 2024
Significant operational transformation, with continued growth in annual
recurring revenues
Tracsis (LSE: TRCS), a leading transport technology provider, is pleased to
announce its audited final results for the year ended 31 July 2024.
Financial Results (£'m) 2024 2023
Revenue 81.0 82.0 -1%
Adjusted EBITDA * 12.8 16.0 -20%
Adjusted EBITDA* % 15.7% 19.4% -370bps
Cash 19.8 15.3
Adjusted diluted earnings per share * 25.1p 38.5p -35%
Statutory Results
Operating profit 1.0 7.3 -87%
Profit before tax 1.0 7.1 -86%
Basic earnings per share 1.6p 22.8p -93%
Final dividend per share 1.3p 1.2p +8%
Total dividend per share 2.4p 2.2p +9%
Financial Highlights:
· Financial performance in line with revised guidance provided in
the 13 June 2024 trading update**
· Rail Technology & Services annual recurring and repeat
revenue increased by 10% to £25.5m
· Healthy cash generation and strong balance sheet to invest in
further growth
· £3.0m of exceptional costs related to Group transformation
· Continuation of progressive dividend policy
Operational and Strategic Highlights:
· New UK rail technology contracts awarded across smart ticketing
& delay repay, safety & risk management, and operations & planning
solutions
· Pipeline of software opportunities increased by 200% across UK
and North American markets
· Completed deployment of new Train Dispatch product with a US
commuter rail provider, opening up a large new product segment opportunity in
North America
· First intercity deployment of TRACS Enterprise now live with a
large UK train operator
· Transformed the Group's operating model, creating a scalable
platform for accelerated growth and focusing the Group's products and services
portfolio on higher-margin, growth activities
Current Trading and Outlook:
· Activity levels increasing following the UK General Election,
though some near-term variability in customer activity in the UK through H1
· Network Rail Control Period 7 funding pressures impacting UK
Remote Condition Monitoring hardware activity
· Increases in UK national insurance and minimum wage will add cost
from April 2025 and beyond; expected to impact FY25 EBITDA directly by
c.£0.5m
· Several large multi-year software opportunities in the latter
stages of their procurement processes, which are expected to be awarded during
FY25
· Tracsis's products and services are well aligned with the new UK
government's strategic plan for rail
· Actions taken to transform the Group's operating model and
accelerate pipeline growth leave it well positioned to deliver long-term
growth
· Evaluating M&A opportunities in line with disciplined
criteria
Chris Barnes, Chief Executive Officer, commented:
"Despite our financial results for FY24 being impacted by the timing of the UK
General Election and lower yard automation conversion in North America, we
have made significant progress over the past 12 months in transforming our
operating model and laying the foundations for our future growth.
We have delivered further growth in rail technology licence usage and annual
recurring revenues, and have a large pipeline of new software opportunities in
both the UK and North America, where long-term market drivers remain strong.
The UK Rail Industry remains in a period of transition as the new government
prepares to provide further detail on its strategic vision for the railway.
Tracsis' products and services are well placed to support this and we look
forward to the legislation relating to Great British Railways that is expected
in the coming months.
Some short-term headwinds remain across the UK Rail supply chain related to
Control Period 7 funding restrictions from Network Rail, which is impacting
our Remote Condition Monitoring hardware activity. The changes to national
insurance and minimum wage legislation announced in the October Budget will
bring additional cost into our business. We are working hard to mitigate these
and are continuing to focus on converting our large opportunity pipeline and
diversifying our client base both in the UK and internationally.
We are well positioned to deliver sustainable growth in FY25 and beyond. We
have invested in upskilling our commercial, technical and delivery
capabilities, and post year-end have delivered the successful go-live of a new
Train Dispatch product in North America as well as the latest deployment of
our TRACS Enterprise solution in the UK. We remain focused on delivering
long-term value through the continued pursuit of both organic and acquisitive
growth, supported by a strong balance sheet and healthy cash generation, and
look to the future with confidence."
* 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 9.
** 13 June 2024 trading update noted FY24 revenue range of between £80.0m and
£82.0m and FY24 adjusted EBITDA* margin slightly higher than the 15.5%
delivered in H1 24
Presentation and Overview videos
Tracsis is hosting an online presentation open to all investors on Friday 22
November 2024 at 1.00pm UK time. Anyone wishing to connect should register
here: https://bit.ly/TRCS_FY24_results_webinar
(https://bit.ly/TRCS_FY24_results_webinar)
A video overview of the results featuring CEO Chris Barnes and CFO Andy Kelly
is available to view here: https://bit.ly/TRCS_FY24_overview
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fbit.ly%2FTRCS_FY24_overview&data=05%7C02%7CAndrew.Kelly%40tracsis.com%7C4ee2ed61debd4de93d7f08dd0869d5fb%7C6b98f2667d234d0a8b8a7e4cf7fded86%7C0%7C0%7C638675972872352661%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C4000%7C%7C%7C&sdata=%2B0yj3LBog3jburJSVNFWCfwEHpMVAfpF6aeJil4gVOY%3D&reserved=0)
Enquiries
Tracsis plc +44 (0)845 125 9162
Chris Barnes (CEO)
Andy Kelly (CFO)
Berenberg (Nominated Adviser, Corporate Broker & Financial Adviser) +44 (0)20 3207 7800
Mark Whitmore / Richard Andrews / Mollie D'Arcy Rice
James Thompson (QE)
Alma Strategic Communications +44 (0)20 3405 0205
David Ison / Rebecca Sanders-Hewett / Joe Pederzolli / Sarah Peters tracsis@almastrategic.com (mailto:tracsis@almastrategic.com)
Management Overview
Introduction
The Group has made good progress this year in executing its strategy to create
a scalable platform for accelerated long-term growth.
As previously announced, our financial performance in the final quarter of
FY24 was impacted by the timing of UK pre-General Election restrictions, as
well as by lower than anticipated conversion of our Yard Automation
opportunity pipeline in North America. As a result, full-year revenue and
EBITDA were lower than we achieved in the prior year. This was a disappointing
overall result, however the progress we have made against our key strategic
focus areas positions the Group well to deliver growth in the next financial
year and beyond.
Actions to transform the Group's operating model have been delivered to plan.
Cost savings from these actions have been substantially re-invested in
upskilling our commercial, technical and delivery capabilities, creating the
foundations for future growth.
Year in review
Our activities this year have been focused in four key areas, as summarised
below.
1. New contract wins, product deployments and continued growth in recurring
and repeat revenue
Recurring and repeat revenue in the Rail Technology & Services Division
increased by 10% to £25.5m, driven by strong growth in the UK from new
contract wins and the deployment of contracts won in previous years.
Continued growth in smart ticketing: with the two new Pay As You Go ("PAYG")
contracts with UK train operators announced with the FY23 results now
successfully live, including the first EMV (contactless bankcard) deployment
outside of Transport for London with Transport for Wales. The multi-year delay
repay contract that was announced with the H1 2024 results has also now been
fully deployed, and the pilot deployment of our unique PAYG mobile app
('Hopsta') is nearing completion.
Next funded phase of RailHub development has started: to expand the
functionality of the safety and risk management platform in the UK, with
go-live expected in early 2026.
First intercity deployment of TRACS Enterprise went live in November 2024 with
a UK Train Operator. The next full deployment with another UK passenger
operator is expected during H2 of the current financial year.
New wins secured post year end: including an expansion of our Remote Condition
Monitoring hardware and software solution with a large US transit operator
and, in the UK, new work across our Operations & Planning, Safety &
Risk Management, and Customer Experience solutions that will start to deliver
revenue in FY25.
2. Significant pipeline growth in UK and North American Rail Markets
Rail technology pipeline increased by 200% since 31 July 2023 following
investment to enhance our commercial teams in the UK and North America. FY24
EBITDA includes the cost of this investment.
Deployment of new Train Dispatch system in North America completed with a US
commuter rail customer in the first quarter of FY25. This opens up a large new
product segment opportunity in North America where the industry is actively
looking for new participants.
Digital transformation remains integral to the rail industry: as an enabler of
a data-driven, customer-focused and safety-critical service and net zero
future. We continue to see significant and enduring tailwinds in both the UK
and North American markets and do not expect recent government changes to
impact the long-term opportunity in either territory.
3. Transformation of the Group's operating model delivered to plan
Optimised our operating model: with a particular focus on enhancing our
technology development and delivery capabilities to improve timeliness,
quality, and repeatability. The Rail Technology UK business now operates under
a single senior leadership team, and we are establishing a consistent
groupwide approach to how we develop and deliver application software based on
industry best practice. As part of this, we recruited a Chief Technology
Officer to oversee all aspects of product development and architecture across
the rail technology portfolio and have invested in our project delivery team.
Refocused the portfolio: on fast-growing, higher margin activities. As
previously reported, the Group will no longer pursue new contracts for certain
non-software related activities which are not aligned with these objectives.
These activities are principally within the Transport Consultancy business in
the UK and within part of the Rail Technology North America portfolio. This
will enable the Group to deliver accelerated growth and long-term margin
improvement.
Streamlining our footprint: with the closure of five operating locations to
align with the Group's new organisational structure. Work to reduce our legal
entity footprint will continue in FY25.
Upgraded operating systems and processes: including a single IT operating
environment across our UK rail technology businesses to enhance the efficiency
of our operations, better enable collaboration across the Group, and improve
operational resilience. We have also implemented a new finance system that
will deliver improved management information.
4. Focus on M&A as a core component of our growth strategy
Pursuit of acquisitions to supplement organic growth, with a focus on
extending our software and technology footprint and enhancing recurring
revenue growth. We have a pipeline of opportunities in the UK, North America
and targeted overseas markets that are being evaluated in line with our
disciplined criteria.
Progress against our strategic priorities
Tracsis' purpose is to 'make transport work'. 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.
Maximise Existing Product Footprint
Expand our product footprint and increase annual recurring software revenue
through the continual innovation and deployment of products and services,
complemented by high quality delivery and an excellent close working
relationship with our customers
Focus for FY 24 Progress since HY 24
· Delivery of orderbook of rail technology contracts · Multi-year delay repay deployment now completed with UK TOC
· First intercity deployment of TRACS Enterprise completed with UK TOC
· One further full deployment of TRACS Enterprise due to go live during
the current financial year
· Grow pipeline of rail technology opportunities in UK and North · Further growth in the pipeline of software opportunities. This has
America now increased by 200% since 31 July 2023 across UK and North American rail
technology markets
· Accelerate growth in North American market · Lower revenue than prior year due to lower revenue from contract
milestones
· Large software licence deployment for a new Train Dispatch product in
the North American transit market completed. This is driving pipeline growth
from both passenger and freight operators
· Delivered the next phase of the ongoing expansion of our Remote
Condition Monitoring hardware and software solution with a large US transit
operator during Q1 of FY25
· Continue to improve the quality, timeliness, and repeatability of · Continued to enhance capabilities including recruitment of rail
future product delivery technology UK head of platforms, head of QA & test, head of software
development, and head of project delivery
Expand Into New 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
Focus for FY 24 Progress since HY 24
· Continue to execute organic growth strategy · 10% increase in Rail Technology & Services recurring and repeat
revenue (FY24 vs prior year)
· 10% organic revenue growth in UK rail technology market (FY24 vs
prior year)
· Restructured Transport Consultancy business to focus on higher margin
activities
· Utilise data analytics, GIS and Earth Observation capabilities to · Area Monitoring System (AMS) developed by the Data Analytics/GIS
deliver additional insight to our customers across the transportation sector business in collaboration with two European geospatial companies won the award
for 'Data Innovation of the Year' at the 2024 Public Sector Digital
Transformation Awards held in Dublin
· Disciplined capital allocation for investment in software and · First pilot deployment of Hopsta app nearing completion
technology products
· Invested in Digital Track Warrant, which is a unique addition to our
Train Dispatch product offering in North America
· Pipeline of 'next generation' R&D opportunities being evaluated
Operate as '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
Focus for FY 24 Progress since HY 24
· Transformation of the Group operating model · Transformation activities delivered to plan
· Further headcount reductions actioned where roles were duplicated or
no longer required
· Closed three further operating locations as part of streamlining our
operating footprint (five now closed in total)
· Streamlining of legal entity footprint is ongoing
· Alignment of group-wide systems and processes built around 'One · Finance and HR systems upgrade completed, to deliver improved
Tracsis' management information
· Continue to execute people strategy · Recruitment of Chief People Officer to support implementing a global
delivery model
· Continue to execute sustainability strategy aligned with our 2030 · First external audit of groupwide ISO14001 (environmental management)
carbon neutral ambition certification completed with zero non-conformances
· Carbon reduction plan completed. This will be published in early 2025
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
Focus for FY 24 Progress since HY 24
· Active pursuit of M&A to extend technology and data analytics · Growth in M&A pipeline, focused on UK, North American and
footprint targeted overseas markets
· Senior leadership role dedicated to M&A created as part of Group
transformation
· Several targets are being evaluated against our disciplined criteria
Financial Summary
Tracsis delivered Group revenue of £81.0m which was £1.0m (1%) lower than
the prior year (2023: £82.0m).
As previously announced, the Group's trading performance for the year to 31
July 2024 includes the effect of the timing of the UK General Election that
took place on 4 July 2024. This was preceded by a period of pre-election
activity restrictions that impacted the Group's trading in the final two
months of the financial year, principally across the UK Rail Technology,
Transport Consultancy and Traffic Data businesses. We estimate that the total
adverse impact of the UK General Election on FY24 Group revenue was c£2m. In
addition, the prior year included c£4m of revenue that, as anticipated, did
not repeat. £2m of this was perpetual licence revenue in the Rail Technology
& Services Division as we continue to transition to an increasingly
recurring revenue-focused model for new contract wins. The other c£2m was in
the Data, Analytics, Consultancy & Events Division and related to Data
Analytics/GIS contracts that did not repeat.
Divisional performance is explained in more detail in the 'Divisional Trading
Progress and Prospects' section below.
Adjusted EBITDA* of £12.8m was £3.2m (20%) lower than prior year (2023:
£16.0m). In addition to the lower overall revenue, this reflects the
anticipated non-repeat of high margin perpetual licence revenue in the prior
year, investment to enhance the Group's capabilities and to accelerate the
growth of the Group's pipeline of large multi-year opportunities, and a
significant margin decrease in the Transport Consultancy business that has now
been restructured.
The Group has executed a programme of actions during the year to transform its
operating model, better positioning it to deliver long-term scalable growth,
increased annual recurring software revenue, and improved profitability. In
the year to 31 July 2024, we have incurred £3.0m of costs in order to deliver
this transformation. These are primarily related to headcount reductions where
roles are duplicated or no longer required, IT transformation costs to embed
industry best practice, enhancements to our cyber security provision and
remediation of identified historic non-conformance, third party costs to
support the upgrade of the Group's operating systems and processes, and costs
associated with streamlining the Group's operating site footprint and legal
entity structure. These costs have been reported as exceptional items so the
underlying year on year trading performance of the Group can be more clearly
understood. These actions have been substantially completed during the FY24
financial year. Actions to complete the streamlining of the Group's legal
entity structure will continue through FY25. £2.7m of these transformation
costs were cash items, of which £2.3m were outflows in the year to 31 July
2024. We expect the remaining cash outflow of c£0.4m during FY25.
Cost savings resulting from these actions have been substantially re-invested
in upskilling our commercial, technical and delivery capabilities. This will
better position the Group to convert and deliver a growing pipeline of
multi-year software opportunities.
Statutory profit before tax of £1.0m is £6.1m lower than prior year (2023:
£7.1m). This is principally driven by the £3.2m decrease in adjusted
EBITDA*, and the £3.0m of exceptional costs relating to the transformation of
the Group's operating model, both described above. The balance of the movement
in profit before tax reflects the following items:
• £nil of other exceptional costs (2023: £0.1m) representing the
unwinding of previously discounted contingent consideration balances in
accordance with IFRS accounting standards (2023: £0.7m). The prior year also
included a net £0.6m decrease in the assessed value of contingent
consideration based on the future expectations from previous acquisitions,
that was not repeated this year;
• £2.4m depreciation charge which is higher than the prior year
following further investment to upgrade our IT infrastructure (2023: £2.1m);
• £5.5m amortisation of intangible assets at a similar level to the
prior year (2023: £5.6m);
• £0.9m share based payment charges (2023: £1.2m);
• <£0.1m other operating income (2024: £0.4m) being a lower
level of R&D corporation tax credits in the UK, reflecting the fact that
the Group substantially completed development work on its UK product portfolio
during FY23; and
• <£0.1m net finance income (2023: £0.1m expense)
Adjusted earnings per share decreased by 35% to 25.5 pence (2023: 39.4
pence). Statutory earnings per share decreased to 1.6 pence (2023: 22.8
pence) including the effect of the exceptional transformation costs recognised
in the year.
Cash Generation
The Group continues to have significant levels of cash and has no debt. At 31
July 2024, the Group's cash balances were £19.8m (2023: £15.3m). Cash
generation remains healthy.
Free cash flow* decreased to £5.4m (2023: £8.0m) after £2.3m of cash
outflows relating to exceptional transformation costs (2023: £nil). Excluding
these, free cash flow* was at a similar level to the prior year despite the
lower level of adjusted EBITDA*. This reflects the following items:
• A net £0.5m increase in working capital (2023: £2.7m increase)
reflecting trading patterns including the impact of the UK General Election in
the final two months of the year;
• Net capital expenditure of £1.2m (2023: £1.5m) which principally
relates to investment in upgrading our IT infrastructure, and the purchase of
equipment to support high activity levels in Traffic Data & Events;
• Net lease liability payments of £1.4m were slightly lower than
the prior year (2023: £1.5m) as we start to rationalise our operating
footprint;
• Capitalised development costs of £0.5m (2023: £0.3m) including
the Hopsta smart ticketing mobile app platform for our PAYG smart ticketing
technology and the Digital Track Warrant in North America;
• Tax paid of £1.7m was £0.4m lower than the prior year
(2023: £2.1m); and
• £0.2m 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, at a similar level to the prior year (2023: £0.1m
inflow).
Free Cash Flow*
Year ended Year ended
31 July 31 July
2024 2023
£'m £'m
Adjusted EBITDA * 12.8 16.0
Changes in working capital (0.5) (2.7)
Purchase of plant and equipment (net of proceeds from disposal) (1.2) (1.5)
Lease liability payments (net of lease receivable receipts) (1.4) (1.5)
Capitalised development costs (0.5) (0.3)
Tax paid (1.7) (2.1)
Other((1)) 0.2 0.1
Free Cash Flow(*) before exceptional items 7.7 8.0
Cash outflows on exceptional items (2.3) -
Free Cash Flow(*) 5.4 8.0
((1)) Includes net interest received or paid, profit on disposal of plant
& equipment, and proceeds from exercise of share options
All material earn-outs were completed in the previous financial year, and
there was no cash outflow in the year relating to contingent consideration on
previous acquisitions (2023: £9.3m outflow). The final £0.3m tranche of
deferred consideration for the 2021 acquisition of Flash Forward Consulting
was paid in February 2024 (2023: £0.3m).
Dividends paid to shareholders were £0.7m (2023: £0.6m) and there was a
£0.1m favourable impact from foreign exchange (2023: £0.3m favourable).
As a result, total cash balances increased by £4.5m to £19.8m.
* 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 9.
Divisional Trading Progress and Prospects
Rail Technology & Services
Summary segment results:
Revenue £37.6m
(2023: £37.9m)
Adjusted EBITDA* £9.8m (2023:
£10.4m)
Profit before Tax £2.7m
(2023: £5.2m)
The Rail Technology & Services Division delivered FY24 revenue 1% lower
than prior year. This included the non-repeat of c£2m perpetual licence
revenue in the prior year, as we continue to transition to an increasingly
recurring revenue-focused model for new contract wins. In addition, there were
lower levels of contract delivery revenue in North America, reflecting the
timing of milestone delivery in the orderbook and lower than anticipated
conversion of our Yard Automation opportunity pipeline.
There was strong organic growth in the UK, where revenue increased by 10%
despite the effect of pre-election activity restrictions in the final two
months of the year. Growth in this market included the benefit from new
contract wins in the year and in the prior year. This, in turn, resulted in
further strong growth in annual recurring and routinely repeating rail
technology revenue for the Division as a whole, which increased by 10% to
£25.5m.
Adjusted EBITDA* decreased by £0.6m to £9.8m (2023: £10.4m). In addition to
the non-repeat of high margin perpetual licence revenue, this reflects
targeted investment in enhancing the business's capabilities. This includes
enhancing our commercial teams in both the UK and North America, and investing
to expand and upskill our SaaS delivery capabilities. This investment has
delivered significant growth in the pipeline of major software opportunities,
and ensures that we have the operational capability to deliver these once
secured. We estimate the opportunity pipeline across the UK and North American
rail markets has increased by 200% since 31 July 2023.
Profit before tax decreased by £2.5m to £2.7m (2023: £5.2m) and includes
£1.8m of exceptional transformation costs.
Rail Technology UK
Total revenues from the Group's Rail Technology UK business increased by 10%
to £31.9m (2023: £29.0m). The non-repeat of £0.8m point in time revenue
from software licence deployments in the prior year was more than offset by
underlying growth driven primarily by our Rail Operations & Planning and
Customer Experience product suites.
Growth in Rail Operations & Planning was driven by new contract wins
across our suite of products, and orderbook delivery. Work has continued on
delivering the orderbook of full TRACS Enterprise solutions. The first
intercity deployment with a UK passenger operator was completed in November
2024. A further deployment with a UK passenger operator is scheduled to go
live during FY25. Delivery timelines in this sector are typically determined
in partnership with our customers based around combined resource availability.
We continue to see a good pipeline of opportunities for this product with
several UK train operators actively looking for new software solutions in this
area.
Growth in Customer Experience revenue included the benefit from increased
usage of our Pay As You Go ("PAYG") smart ticketing and delay repay solutions.
This technology is well aligned with passenger requirements and with the UK
Government's strategic intent to deliver increased PAYG, multi-modal
ticketing. The two new PAYG contracts with UK train operators that were
announced with the full year 2023 results have been fully delivered. The
deployment with Transport for Wales ("TfW") is 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 deliver an automated, frictionless experience for the customer. TfW intends
to ultimately extend this offering to deliver a multi-modal PAYG solution
including bus. The second deployment was a smartcard system with Merseyrail.
Work has started on expanding this solution to include EMV deployment. We have
also fully deployed the new multi-year delay repay contract that was announced
with the H1 2024 results.
We have continued to invest in the deployment of a mobile app platform
('Hopsta') that puts this smart ticketing technology directly into the hands
of the consumer and uses geofencing technology to avoid the requirement for
expensive gateline infrastructure in stations. The first pilot deployment of
this unique solution is nearing completion.
Having completed the roll-out of the RailHub safety and risk management
platform across Network Rail and its supply chain in the prior year, we have
now been contracted to deliver the next significant funded phase of
development work to add further functionality to this platform. Work to
deliver this started in the second half of the financial year.
Remote Condition Monitoring ("RCM") revenue was lower than the record achieved
in the prior year. Performance in this product area is linked to the
investment funding cycle within Network Rail which consists of 5 year 'Control
Periods'. There was some softening of demand towards the end of Control Period
6 which ran to 31 March 2024. This has continued through the initial months of
Control Period 7, where a tightening of financial management at Network Rail
is impacting most of the UK rail supply chain((1)). We are monitoring this
closely and expect this will continue into 2025. Our order visibility in this
product category is lower, and we now anticipate a lower overall level of RCM
activity during FY25 based on current run rates.
Post year end, we secured and delivered a contract for the ongoing expansion
of our RCM hardware and software solution with a large US transit operator.
This is the third phase of a program of work that has been ongoing over the
last three years with the objective to significantly improve asset performance
and asset availability across their network.
Rail Technology North America
Revenue of £5.7m in Rail Technology North America was £3.2m lower than prior
year (2023: £8.9m). This is attributable to two main factors. In the prior
year we delivered a c£1.2m perpetual software licence deployment that was not
repeated as anticipated. In addition, in the prior year we delivered £1.6m
increased revenue from contract milestones based on delivery timelines in the
orderbook.
Operational activity during the year was focused on delivering the full
roll-out of the new Train Dispatch (PTC BOS((2))) with a US commuter rail
customer. The full deployment of this solution was completed during the first
quarter of FY25. The successful delivery of this large project that was in the
orderbook when Tracsis acquired the business in 2022 will open a large new
product segment opportunity for Tracsis in North America where the industry is
actively looking for new participants. We continue to see strong pipeline
growth for our Train Dispatch software from both passenger and freight
operators.
We have an installed base of customers for our Yard Automation product
offering, where we continue to deliver upgrade and maintenance work. This
product solution has a significant hardware component, sourced from third
party manufacturers, and is therefore lower margin than the Train Dispatch
software solutions. During FY24 the conversion of new Yard Automation
opportunities was lower than we expected. Our focus in this market is on
continuing to support our installed customer base, and post year end we have
secured new orders with these customers.
Our strategic focus in North America is on growing and converting the pipeline
of large software opportunities. Having invested in enhancing our sales team
in this market, we have seen significant growth in the opportunity pipeline
this year. There are some large opportunities currently in the latter stages
of their procurement process that are expected to deliver revenue during H2 of
the current financial year. Procurement and delivery timelines in this market
are often determined by customers' operational requirements. There will likely
be more volatility in the phasing of revenue growth in this market as we
procure these opportunities and transition to a recurring revenue model.
((1)) Source: Network Rail Board minutes (May 2024, published 30 August 2024)
and Rail Industry Association Annual Conference (November 2024).
((2)) Positive Train Control Back Office Solution. This integrates Tracsis'
Train Dispatching product with the Positive Train Control (PTC) family of
automatic train protection systems in the US.
Data, Analytics, Consultancy & Events
Summary segment results:
Revenue
£43.4m (2023: £44.1m)
Adjusted EBITDA*
£2.9m (2023:
£5.6m)
(Loss) / Profit before Tax (£0.8m)
(2023: £3.0m)
The Data, Analytics, Consultancy & Events Division delivered revenue 2%
lower than the prior year, which included the impact of the pre-General
Election activity restrictions on the Transport Consultancy and Traffic Data
businesses in the last two months of the year, and the anticipated non-repeat
of c£2.0m Professional Services revenue.
Adjusted EBITDA* decreased to £2.9m (2023: £5.6m). In addition to the impact
of lower overall revenue, this also reflects a significant margin decrease
from the Transport Consultancy business in the UK. We have taken actions to
restructure our Transport Consultancy business, including no longer pursuing
certain activities that were not delivering an appropriate return. We expect
this will see a short-term reduction in revenue for this Division, but having
also adjusted our cost base we expect to deliver an improved margin
performance for FY25 financial year.
The Division reported a loss before tax of (£0.8m) (2023: £3.0m profit)
including £1.2m of exceptional transformation costs.
Traffic Data & Events
Revenue from the combined Traffic Data & Events business increased by 5%
to £30.3m (2023: £28.8m). Activity levels in Events remained high and it
delivered record revenue, with new wins more than offsetting the effect of
other events and sporting fixtures that did not repeat in FY24. There was a
short-term adverse impact on Traffic Data activity levels in the last two
months of the year due to the timing of the UK General Election. Activity
levels are returning to normal following the election, and we expect this to
continue through the FY25 financial year. One of the Group's largest Traffic
Data customers experienced a cyber-attack during Q1 of FY25 that may have a
short-term impact on activity levels with this customer during H1 of FY25.
The business has secured large contract renewals with both Events and Traffic
Data customers post year end, for FY25 revenue delivery.
Professional Services
Total revenue across our Data Analytics/GIS and Transport Consultancy
businesses decreased by 14% to £13.1m (2023: £15.4m). In addition to the
c£2.0m anticipated non-repeat of certain revenue items in Data Analytics/GIS,
this included lower activity levels in Transport Consultancy. This business
was impacted by the timing of the UK General Election and has also experienced
an underlying decrease in activity levels as customer budgets and funding
availability have contracted. This resulted in a significant decrease in
profitability in FY24. As described above, we have taken actions to
restructure this business as a result.
The Area Monitoring System (AMS) developed by the Data Analytics/GIS business
in collaboration with two European geospatial companies won the award for
'Data Innovation Project of the Year' at the 2024 Public Sector Digital
Transformation Awards held in Dublin.
Our strategic focus in this part of the Group is on improving profitability
and on expanding our Geo Intelligence capabilities into the UK and North
American rail markets.
Dividend
The Group remains committed to the progressive dividend policy that was
adopted in 2012. The Board has recommended a final dividend of 1.3 pence per
share. The final dividend, subject to shareholder approval at the forthcoming
Annual General Meeting, will be paid on 7 February 2025 to shareholders on the
register at the close of business on 24 January 2025. This will bring the
total dividend for the year to 2.4 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 was
part of the Board succession planning following the completion of Chris's
third three-year term. Tracy Sheedy was appointed to the Board as a
Non-Executive Director on 1 September 2023, and succeeded Jill Easterbrook as
Chair of the Remuneration Committee from that date. Ross Paterson was
appointed to the Board as a Non-Executive Director on 2 April 2024. Liz
Richards stepped down from the Board on 30 June 2024. Ross succeeded Liz as
Chair of the Audit & Risk Committee on that date.
Outlook
Activity levels increasing but with short term headwinds in the UK
Activity levels are increasing following the UK General Election. This is
expected to continue through FY25 although some near-term industry wide
variability in customer activity in the UK has persisted through Q1 and we
anticipate this will continue through H1. We continue to monitor developments
around: (i) a tightening of financial management within Network Rail that is
impacting Control Period 7 funding across the UK rail supply chain; (ii) the
implementation of the UK government's strategic plan for rail; (iii) and the
short-term impact from a large Traffic Data customer where a significant
recent cyber-attack has impacted its procurement activity. We are also working
to mitigate the recently announced Budget changes in UK national insurance and
minimum wage legislation that will take effect from April 2025.
We have secured FY25 contract renewals in both Divisions, have some key
product deployment milestones for delivery in the coming months, and have
several multi-year rail technology software opportunities that will be
announced in FY25 and are in the latter stages of their procurement processes.
Well positioned to deliver long-term scalable growth
Tracsis' strategy to deliver organic and acquisitive growth, supported by a
strong balance sheet and long-term structural tailwinds in its core markets,
remains unchanged.
Our end market drivers are strong. In the UK and North America, we see
significant long-term tailwinds as the industry looks to modernise and adopt
digital solutions. 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. We therefore believe that we are well
positioned to capitalise on these changes and have a large pipeline of
opportunities to help drive market share and expand our footprint in these
markets.
The new Government has outlined its strategic plans for the future of UK Rail
and we expect legislative details to be confirmed in the coming months. This
will include the creation of Great British Railways, the re-nationalisation of
train operating companies, and a focus on improving service efficiency,
reliability, safety, and customer experience including PAYG smart ticketing,
best value fare guarantees, and automated delay repay. Tracsis' products and
services are well aligned with these objectives.
In North America, the recent go-live of our new Train Dispatch system was a
significant milestone for the Group. The successful delivery of this system
opens up a large new product segment opportunity for Tracsis where the market
is looking for new participants. We have a growing pipeline of opportunities,
some of which are in the latter stages of their procurement cycle. Procurement
and delivery timelines in this market are often determined by customers'
operational requirements. There will likely be more volatility in the phasing
of revenue growth in this market as we procure these opportunities and
transition to a recurring revenue model. The outcome of the US election is not
expected to impact our long-term growth opportunity in North America.
We have significantly transformed the Group's operating model in order to
accelerate its future growth trajectory. This has been particularly focused
around enhancing our technology development and delivery capabilities to
improve the timeliness, quality and repeatability of delivery. This will
better enable the Group to achieve margin accretion from future multi-year
software contracts, and to invest in developing the next generation of its
products. We have also re-focused the Group's product and services portfolio
on fast-growing, higher margin activities and will no longer pursue certain
non-software related activities which are not aligned with these objectives.
We are confident that these actions will enable to Group to better deliver
improved profitability and long-term scalable growth.
We are actively pursuing our pipeline of M&A opportunities, with a focus
on extending our software and technology footprint and enhancing recurring
revenue growth. We continue to evaluate this growing pipeline of opportunities
in line with our disciplined approach.
The Group remains well positioned to deliver growth in the coming financial
year and beyond.
Jill Easterbrook Chris Barnes
Non-Executive Chair Chief Executive Officer
19 November 2024
Consolidated statement of comprehensive income for the year ended 31 July 2024
2024 2023
Notes £000 £000
Revenue 3 81,022 82,023
Cost of sales (35,009) (32,072)
Gross profit 46,013 49,951
Administrative costs (45,046) (42,696)
Adjusted EBITDA* 3, 9 12,759 15,952
Depreciation (2,371) (2,110)
Amortisation of intangible assets (5,526) (5,599)
Other operating income 7 350
Share-based payment charges (899) (1,248)
Operating profit before exceptional items 3,970 7,345
Exceptional items 4 (3,003) (90)
Operating profit 967 7,255
Net finance income / (expense) 28 (119)
Profit before tax 3 995 7,136
Taxation 5 (507) (329)
Profit after tax 488 6,807
Other comprehensive expense
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences (295) (205)
Total comprehensive income for the year 193 6,602
Earnings per ordinary share
Basic 6 1.62p 22.81p
Diluted 6 1.59p 22.30p
* Earnings before finance income, tax, depreciation, amortisation, exceptional
items, other operating income and share-based payment charges - see note 9.
Consolidated balance sheet as at 31 July 2024
2024 2023
Notes £000 £000
Non-current assets
Property, plant and equipment 4,992 4,789
Intangible assets 10 52,610 57,694
Investments - equity - -
Deferred tax assets 1,376 650
58,978 63,133
Current assets
Inventories 1,512 1,465
Trade and other receivables 21,536 20,371
Current tax receivables 1,011 628
Cash and cash equivalents 19,773 15,307
43,832 37,771
Total assets 102,810 100,904
Non-current liabilities
Lease liabilities 737 953
Contingent consideration payable 7 - 139
Deferred tax liabilities 7,132 7,161
7,869 8,253
Current liabilities
Lease liabilities 1,123 1,137
Trade and other payables 25,498 23,435
Contingent consideration payable 7 151 -
Deferred consideration payable 7 - 308
26,772 24,880
Total liabilities 34,641 33,133
Net assets 68,169 67,771
Equity attributable to equity holders of the Company
Called up share capital 121 120
Share premium 6,535 6,535
Merger reserve 6,161 6,161
Retained earnings 55,567 54,875
Translation reserve (165) 130
Fair value reserve (50) (50)
Total equity 68,169 67,771
Consolidated statement of changes in equity for the year ended 31 July 2024
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 expense - - - - (205) - (205)
Total comprehensive income - - - 6,807 (205) - 6,602
Transactions with owners:
Dividends - - - (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
At 1 August 2023 120 6,535 6,161 54,875 130 (50) 67,771
Profit for the year - - - 488 - - 488
Other comprehensive expense - - - - (295) - (295)
Total comprehensive income - - - 488 (295) - 193
Transactions with owners:
Dividends (note 8) - - - (695) - - (695)
Share-based payment charges - - - 899 - - 899
Exercise of share options 1 - - - - - 1
At 31 July 2024 121 6,535 6,161 55,567 (165) (50) 68,169
Consolidated cash flow statement for the year ended 31 July 2024
2024 2023
Notes £000 £000
Operating activities
Profit for the year 488 6,807
Net finance (income) / expense (28) 119
Depreciation 2,371 2,110
(Profit) / loss on disposal of property, plant and equipment (15) 9
Non-cash exceptional items 4 274 90
Payment of contingent consideration 7 - (1,661)
Other operating income (7) (350)
Amortisation of intangible assets 5,526 5,599
Income tax charge 5 507 329
Share-based payment charges 899 1,248
Operating cash inflow before changes in working capital 10,015 14,300
Movement in inventories (48) (416)
Movement in trade and other receivables (2,394) (2,085)
Movement in trade and other payables 2,408 (213)
Cash generated from operations 9,981 11,586
Interest received 171 36
Income tax paid (1,652) (2,065)
Net cash flow from operating activities 8,500 9,557
Investing activities
Purchase of property, plant and equipment (1,487) (1,524)
Proceeds from disposal of property, plant and equipment 241 10
Capitalised development costs (462) (300)
Payment of contingent consideration 7 - (7,591)
Cash held in escrow for payment of contingent consideration 7 - 2,233
Payment of deferred consideration 7 (315) (315)
Net cash flow used in investing activities (2,023) (7,487)
Financing activities
Dividends paid 8 (695) (628)
Proceeds from exercise of share options 1 100
Lease liability payments (1,441) (1,491)
Lease receivable receipts 32 32
Net cash flow used in financing activities (2,103) (1,987)
Net increase in cash and cash equivalents 4,374 83
Exchange adjustments 92 254
Cash and cash equivalents at the beginning of the year 15,307 14,970
Cash and cash equivalents at the end of the year 19,773 15,307
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 2024 or the year ended 31 July
2023 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
2024 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 2023 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.
The Directors consider that the key judgements and estimates made in the
preparation of the Group consolidated financial statements remain as those set
out in the financial statements for the year ended 31 July 2023, other than:
Estimates
Recoverable amount of cash generating units
Value in use has been estimated for each group of cash generating units
("CGUs") as part of the annual impairment test for the Group's goodwill
allocated to its groups of CGUs. The key assumptions used in the calculations,
and the sensitivity of value in use to these key assumptions are set out in
note 10. The group of CGUs most sensitive to these assumptions is Rail
Technology & Services - North America.
Judgements
Level at which goodwill is monitored
Judgement has been used to determine the level at which goodwill should be
monitored. Goodwill has been allocated to groups of CGUs which align with how
performance is reported and appraised for management purposes.
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, except
for 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
A number of new IFRSs have been endorsed by the UK Endorsement Board with
effective dates such that they fall to be applied by the Group.
The following standards and amendments to UK-adopted International Accounts
Standards are the only changes of relevance to these financial statements that
have been applied in the year ended 31 July 2024:
- Amendments to IAS 1 and IFRS Practice Statement 2 'Disclosure of Accounting
policies': effective for periods beginning on or after 1 January 2023.
- Amendments to IAS 12 'International Tax Reform - Pillar Two Model Rules':
effective for periods beginning on or after 1 January 2023.
These amendments had no material impact on either the Group's or Company's
financial statements.
The Amendments to IAS 1 and IFRS Practice Statement 2 'Disclosure of
Accounting Policies' did not result in any changes to the underlying
accounting policies but has impacted the accounting policy information
disclosed in the financial statements.
There are no other standards, interpretations or amendments that required
mandatory application in the current year.
Future developments
There are a number of new standards and amendments issued by the International
Accounting Standards Board (IASB) that will be effective for financial
statements after this reporting period, once endorsed by the UK Endorsement
Board. The most relevant changes for the Group are:
- IFRS 18 'Presentation and Disclosure in Financial Statements': effective for
periods beginning on or after 1 January 2027.
- Amendments to the Classification and Measurement of Financial Instruments:
effective for periods beginning on or after 1 January 2026.
Based on preliminary assessments, the adoption of these standards and
amendments is not expected to have a significant impact on either the Group's
results or financial position. The adoption of IFRS 18, introduces new
required subtotals in profit or loss, including profit or loss before
financing and income taxes.
f) Going concern
The Group is debt free and has substantial cash resources. At 31 July 2024 the
Group had net cash and cash equivalents totalling £19.8m. The Board has
prepared cash flow forecasts for the period through to December 2025 based
upon assumptions for trading and the requirements for cash resources; these
forecasts consider 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 cash flow assumptions required to eliminate
any headroom under the reverse stress test are considered by the Board to be
highly unlikely.
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
Revenue is summarised below:
2024 2023
£000 £000
Rail Technology & Services 37,608 37,862
Data, Analytics, Consultancy & Events 43,414 44,161
Total revenue 81,022 82,023
Revenue can also be analysed as follows:
2024 2023
£000 £000
Rail Technology & Services - United Kingdom 31,902 28,975
Rail Technology & Services - North America 5,706 8,887
Rail Technology & Services 37,608 37,862
Traffic Data & Events 30,269 28,793
Professional Services 13,145 15,368
Data, Analytics, Consultancy & Events 43,414 44,161
Total revenue 81,022 82,023
Revenue to come from contracts entered into with performance obligations not
fulfilled or only partially fulfilled amounted to £20.0m as at 31 July 2024,
of which £14.2m is expected to be recognised within one year, and £5.8m
after one year (£21.4m as at 31 July 2023, with £16.3m to be recognised
within one year and £5.1m after one year).
Further information on revenue is provided below:
2024 2023
£000 £000
Recognised over time 22,122 21,336
At a point in time 15,486 16,526
Rail Technology & Services 37,608 37,862
Recognised over time 222 852
At a point in time 43,192 43,309
Data, Analytics, Consultancy & Events 43,414 44,161
Recognised over time 22,344 22,188
At a point in time 58,678 59,835
Total revenue 81,022 82,023
Major
customers
Transactions with the Group's largest customer represent 8% of the Group's
total revenues (2023: 9%).
Geographical split of
revenue
A geographical analysis of revenue by customer location is provided below:
2024 2023
£000 £000
United Kingdom 64,823 61,422
Ireland 9,687 10,802
Rest of Europe 401 378
North America 4,373 8,643
Rest of the World 1,738 778
Total revenue 81,022 82,023
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 2023 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.
Following the IFRIC agenda decision issued in July 2024 regarding segmental
reporting, the Group has elected to include cost of sales within the segmental
analysis. The prior year comparison has been amended to include these
amounts.
2024
Rail Technology & Services Data, Analytics, Consultancy & Events Unallocated Total
£000 £000 £000 £000
Income statement
Total revenue for reportable segments 37,608 43,414 - 81,022
Cost of sales (6,466) (28,543) - (35,009)
Gross profit 31,142 14,871 - 46,013
Underlying administrative costs (21,319) (11,935) - (33,254)
Adjusted EBITDA for reportable segments 9,823 2,936 - 12,759
Amortisation of intangible assets (4,301) (1,225) - (5,526)
Depreciation (1,005) (1,366) - (2,371)
Exceptional items - net (1,816) (1,187) - (3,003)
Other operating income - - 7 7
Share-based payment charges - - (899) (899)
Interest (payable) / receivable - net (31) 59 - 28
Consolidated profit before tax 2,670 (783) (892) 995
2023
Rail Technology & Services Data, Analytics, Consultancy & Events Unallocated Total
£000 £000 £000 £000
Income statement
Total revenue for reportable segments 37,862 44,161 - 82,023
Cost of sales (6,798) (25,274) - (32,072)
Gross profit 31,064 18,887 - 49,951
Underlying administrative costs (20,691) (13,308) - (33,999)
Adjusted 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
2024
Rail Technology & Services Data, Analytics, Consultancy & Events Unallocated Total
£000 £000 £000 £000
Assets
Total other assets for reportable segments 13,318 15,733 - 29,051
Intangible assets and investments 43,876 8,734 - 52,610
Deferred tax assets - - 1,376 1,376
Cash and cash equivalents 14,446 5,327 - 19,773
Consolidated total assets 71,640 29,794 1,376 102,810
Liabilities
Total other liabilities for reportable segments (17,999) (9,359) - (27,358)
Deferred tax liabilities - - (7,132) (7,132)
Contingent consideration - (151) - (151)
Deferred consideration - - - -
Consolidated total liabilities (17,999) (9,510) (7,132) (34,641)
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)
4. Exceptional items
The Group incurred exceptional items in 2024 and 2023 which are analysed as
follows:
2024 2023
£000 £000
Non-cash:
Contingent consideration fair value adjustment - (559)
Unwind of discounting of contingent consideration 14 649
Transformation costs - footprint 260 -
Cash:
Transformation costs - headcount 1,201 -
Transformation costs - IT 650 -
Transformation costs - footprint 225 -
Transformation costs - other 653 -
Total exceptional items 3,003 90
2024 2023
£000 £000
Split:
Non-cash 274 90
Cash 2,729 -
Total 3,003 90
2024
As described in the Group's Annual Report for the year ended 31 July 2023, the
Group is undertaking a series of actions to transform its operating model.
These actions will establish a consistent and scalable approach to how the
Group develops and delivers application software solutions based around
industry best practice, as well as ensuring that its operating systems,
processes and footprint are aligned with this operating model. These changes
will improve the timeliness, quality and repeatability of delivery, which will
enable the Group to accelerate its future growth trajectory.
The Group's accounting policy is to classify items which are significant by
their size or nature and/or which are considered non-recurring as exceptional
operating items. The costs associated with delivering this programme of
actions have been reported as exceptional operating items consistent with this
policy since they are material in size and nature, and are non-recurring.
Exceptional costs of £2,989,000 associated with delivering this programme of
actions have been recognised in the income statement during the period. These
costs principally relate to: headcount reductions where roles are duplicated
or no longer required; IT transformation costs to embed industry best
practices and remediate any identified historical non-conformance; costs of
reducing the Group's physical and legal entity footprint; and other costs
which comprise third party costs to support the upgrade of the Group's
operating systems and processes.
A further charge totalling £14,000 has been recognised which reflects the
unwinding of the discounting of contingent consideration. The
acquisition-specific discount rate applied was 10.0%. A breakdown of the
remaining fair value of contingent consideration by acquisition is included in
note 7. 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.
Of the cash exceptional costs of £2,729,000 recognised during the year,
£446,000 of the associated cash flows will fall into the next
year.
2023
In the previous financial year, an exceptional £559,000 credit was recognised
in the income statement representing the net decrease in the fair value of
contingent consideration payable at the end of that financial year. This
principally related to certain contracts in Icon GEO that had been superseded
by a new contract won by the Group in that 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 was recognised which reflected the
unwinding of the discounting of 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 items due to the size and volatility of
the items which can vary significantly from year to year.
5. Taxation
Reconciliation of the effective tax rate:
2024 2024 2023 2023
£000 % £000 %
Profit before tax for the period 995 7,136
Expected tax charge based on the standard rate of corporation tax in the UK of 249 25.0 1,499 21.0
25.0% (2023: 21.0%)
Expenses not deductible for tax purposes 134 13.5 59 0.8
Rate changes - - (168) (2.4)
Adjustments in respect of previous years 144 14.5 (427) (6.0)
Overseas tax not at UK tax rate (378) (38.0) (235) (3.3)
Share-based payments differences 358 36.0 (399) (5.5)
Total tax charge 507 51.0 329 4.6
6. Earnings per share
Basic earnings per
share
The calculation of basic earnings per share for the year ended 31 July 2024
was based on the profit attributable to ordinary shareholders of £488,000
(2023: £6,807,000) and a weighted average number of ordinary shares in issue
of 30,169,000 (2023: 29,836,000), calculated as set out
below.
Diluted earnings per
share
The calculation of diluted earnings per share for the year ended 31 July 2024
was based on the profit attributable to ordinary shareholders of £488,000
(2023: £6,807,000) and a weighted average number of ordinary shares in issue
after adjustment for the effects of all dilutive potential ordinary shares of
30,628,000 (2023: 30,529,000) calculated as set out below.
2024 2023
£000 £000
Profit after tax 488 6,807
Weighted average number of ordinary shares
In thousands of shares 2024 2023
Issued ordinary shares at 1 August 29,958 29,662
Effect of shares issued for cash 211 174
Weighted average number of shares at 31 July 30,169 29,836
For the purposes of calculating basic earnings per share 30,169 29,836
Adjustment for the effects of all dilutive potential ordinary shares 459 693
For the purposes of calculating diluted earnings per share 30,628 30,529
Basic earnings per share 1.62p 22.81p
Diluted earnings per share 1.59p 22.30p
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.
2024 2023
£000 £000
Profit after tax 488 6,807
Amortisation of intangible assets 5,526 5,599
Share-based payment charges 899 1,248
Exceptional items - net 3,003 90
Other operating income (7) (350)
Tax impact of the above adjusting items (2,213) (1,638)
Adjusted profit for EPS purposes 7,696 11,756
Weighted average number of ordinary shares
In thousands of shares 2024 2023
For the purposes of calculating basic earnings per share 30,169 29,836
Adjustment for the effects of all dilutive potential ordinary shares 459 693
For the purposes of calculating diluted earnings per share 30,628 30,529
Basic adjusted earnings per share 25.51p 39.40p
Diluted adjusted earnings per share 25.13p 38.51p
7. Contingent and deferred
consideration
a) Contingent
consideration
In 2022 the Group acquired The Icon Group Limited ("Icon"). Under the share
purchase agreement, contingent consideration is payable which is based on the
profitability of Icon 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). 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 €178,000 (£151,000 at 31 July
2024).
As detailed in note 4, a net exceptional credit of £14,000 was recognised,
following the unwind of the discounting as at 31 July 2024. At the balance
sheet date, the Directors assessed the fair value of the remaining amounts
payable which were deemed to be as follows:
2024 2023
£000 £000
The Icon Group Limited 151 139
Contingent consideration payable in respect of the Group's past acquisitions
is considered to be a "Level 3 financial liability" as defined by IFRS 13.
These liabilities are carried at fair value, which is based on the estimated
amounts payable under 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
result from assumptions about revenues and costs, and the resulting liability
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 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 Icon share purchase agreement as detailed in this note. A 10% increase in
the Icon revenue forecast would result in an increase in the fair value of
contingent consideration of £nil.
The movement on contingent consideration can be summarised as follows:
2024 2023
£000 £000
At the start of the year 139 9,321
Cash payment - (9,252)
Fair value adjustment to statement of comprehensive income - (559)
Unwind of discounting 14 649
Exchange adjustment (2) (20)
At the end of the year 151 139
The ageing profile of the remaining liabilities can be summarised as follows:
2024 2023
£000 £000
Payable in less than one year 151 -
Payable in more than one year - 139
Total 151 139
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%. In
the year ended 31 July 2024 the final payment of this deferred consideration
was paid. The movement on deferred consideration can be summarised as follows:
2024 2023
£000 £000
At the start of the year 308 605
Cash payment (315) (315)
Unwind of discounting 7 18
At the end of the year - 308
The ageing profile of the remaining liabilities can be summarised as follows:
2024 2023
£000 £000
Payable in less than one year - 308
Payable in more than one year - -
Total - 308
8.
Dividends
The Board intends to pursue a sustainable and progressive dividend policy,
having regard to the development of the Group.
The cash cost of dividend payments made during the year is below:
2024 2023
£000 £000
Final dividend for 2021/22 - 328
Interim dividend for 2022/23 - 300
Final dividend for 2022/23 362 -
Interim dividend for 2023/24 333 -
Total dividends paid 695 628
The dividends paid or proposed in respect of each financial year are as
follows:
2024 2023
£000 £000
Interim dividend for 2022/23 of 1.0p per share paid - 300
Final dividend for 2022/23 of 1.2p per share paid - 362
Interim dividend for 2023/24 of 1.1p per share paid 333 -
Final dividend for 2023/24 of 1.3p per share proposed 395 -
The total dividends paid or proposed in respect of each financial year ended
31 July were as follows:
2024 2023 2022 2021 2020 2019 2018 2017 2016 2015
Total dividends paid per share 2.4p 2.2p 2.0p £nil £nil 1.8p 1.6p 1.4p 1.2p 1.0p
9. 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
and share-based payments, 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 and share-based
payment charges. 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:
2024 2023
£000 £000
Profit before tax 995 7,136
Finance (income) / expense - net (28) 119
Share-based payment charges 899 1,248
Exceptional items - net 3,003 90
Other operating income (7) (350)
Amortisation of intangible assets 5,526 5,599
Depreciation 2,371 2,110
Adjusted EBITDA 12,759 15,952
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 6: 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:
2024 2023
£000 £000
Net cash flow from operating activities 8,500 9,557
Purchase of property, plant and equipment (1,487) (1,524)
Proceeds from disposal of property, plant and equipment 241 10
Add back: payment of contingent consideration presented within cash flow from - 1,661
operating activities
Proceeds from exercise of share options 1 100
Capitalised development costs (462) (300)
Lease liability payments (1,441) (1,491)
Lease receivable receipts 32 32
Free cash flow 5,384 8,045
10. Intangible assets
The period end carrying values of internally-generated intangible assets and
intangible assets arising from the Group's acquisitions are analysed by group
of cash-generating units in the following table:
Goodwill Customer-related intangibles Technology-related intangibles Order book-related intangibles Marketing-related intangibles Total
2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Rail Technology & Services - United Kingdom (1)
8,914 8,914 16,212 17,705 8,166 9,884 - - - - 33,292 36,503
Rail Technology & Services - North America (2)
4,683 4,684 607 836 4,497 4,969 205 284 592 698 10,584 11,471
Traffic Data & Events (3)
2,246 2,246 1,439 1,910 277 - - - - - 3,962 4,156
Data Analytics / GIS (4)
2,316 2,338 1,929 2,581 527 645 - - - - 4,772 5,564
18,159 18,182 20,187 23,032 13,467 15,498 205 284 592 698 52,610 57,694
(1) Comprises CGUs: Rail Operations and Planning (Safety Information Systems
Limited, Datasys Integration Limited and Bellvedi Limited), MPEC Technology
Limited, Ontrac Technology Limited and Customer Experience (iBlocks Limited
and Tracsis Travel Compensation Services
Limited);
(2) Comprises CGU: Railcomm
LLC;
(3) Comprises CGUs: Tracsis Traffic Data Limited, Tracsis Events Limited and
Customer Insights (Tracsis Rail Consultancy
Limited);
(4) Comprises CGU: Compass Informatics Limited and The Icon Group Limited.
In accordance with the requirements of IAS 36 "Impairment of Assets", goodwill
is allocated to groups of the Group's cash-generating units ("CGUs") which are
expected to benefit from the combination. These groups of CGUs are not larger
than the operating segments of the Group. Each group of CGUs is assessed for
impairment annually or whenever there is a specific indicator of
impairment.
As part of the annual impairment test review, the carrying value of goodwill
has been assessed with reference to value in use over a projected period of
three years together with a terminal value. This reflects the projected cash
flows of the CGU based on the actual operating results, the most recent Board
approved budget and management projections.
The key assumptions on which the value in use calculations are based relate to
business performance over the next three years, long-term growth rates beyond
2027 and the discount rates applied. The key judgements are the level of
revenue and margins anticipated and the proportion of operating profit
converted into cash flow in each year. Forecasts are based on past experience
and take into account current and future market conditions and opportunities.
Discount rate Short-term growth rate* Long-term growth rate
Rail Technology & Services - United Kingdom 14.4% 9.9% 2.0%
Rail Technology & Services - North America 13.5% 29.2% 2.0%
Traffic Data & Events 14.4% 1.5% 2.0%
Data Analytics / GIS 12.9% 6.0% 2.0%
* The short-term revenue growth rate is the compound annual growth rate
between 2024 and the end of the projected period.
Sensitivities of reasonably possible changes have been considered for the Rail
Technology & Services - United Kingdom, Traffic Data & Events and Data
Analytics / GIS groups of CGUs as set out below and resulted in the
recoverable amount exceeding the carrying amount for each
group:
- a 1% point increase in the discount rate;
and
- a 1% point reduction in the long-term growth
rate.
The discount rate applied would need to increase by more than 7.8% points
before the carrying amount would not exceed the recoverable amount in any of
these three groups of
CGUs.
The Rail Technology & Services - North America CGU group is sensitive to
changes in forecasting assumptions. A key assumption within its value in use
is the revenue growth opportunity. While the Directors are confident that the
business can achieve strong revenue growth and that is reflected in the
forecasts used to calculate the value in use of the CGU, that revenue growth
is not guaranteed, and future revenue could be affected by various factors
including the risks identified in our summary of the Group's principal risks
in its Annual Report.
A decrease in the short-term growth rate to a compound annual growth rate of
24.0% and maintaining a long-term growth rate of 2.0% per annum would reduce
the headroom against the non-current assets to £nil. This assumes no cost
mitigations over the forecast period other than the costs of sales that would
be saved from the lost revenue. The Directors consider this possible but
unlikely based on the identified market opportunities for its products and
services, the successful post year-end go-live of a major dispatch project,
and the opportunity to take cost mitigation actions in the event that revenues
are materially lower than the base case forecast. The Directors also note that
operational activity in 2024 was focused on delivering the go-live of a major
dispatch project, and that the CGU group has previously delivered revenue at a
materially higher level than 2024. The forecast short-term growth rate is
equivalent to a compound annual growth rate of 10.5% when compared to the CGU
group's revenue in 2023.
11. Subsequent
Events
There have been no disclosable events subsequent to the balance sheet 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 2024. 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 22 January 2024 at
9.00am.
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